Thursday, July 26, 2012

EUA Dec12: Commission didn’t help price to break decreasing trend

On July 25 the European Commission published its long-awaited document containing the legal clarification of the back-loading and planned changes to the auction regulation, although without firm figures.

All in all, the documents testified the strong commitment of the Commission towards reforming the EU ETS, but they couldn’t disperse uncertainties regarding exact figures and timing of such measures.

Before the announcement couple of market participants speculated on a positive outcome, helping the price reach EUR 7.44 before the official publication of the documents. After 1200 CEST, however we could see something which is known in trading jargon as “buy the rumour and sell the news”. The EUA Dec12 price fell to EUR 6.75 and could recover just slightly in the afternoon.

From the technical point of view, the price started to decline already end of July (after hitting EUR 8.48) when some market participants first came out with concerns regarding planned modifications of the auctioning regulation. (It could be seen that the plan not only faces criticism from industrial lobby groups, but there is no consensus within the Commission either.) The MACD gave a sell-sign on 9 July.

Despite the positive opening yesterday the price couldn’t break the negative trend and the price approached the local low at EUR 6.67. The doji candle from the 24 July was followed by a candle showing a bearish engulfing yesterday (accompanied by a significant volume).

The 20-days moving average went below the 30-days moving average, giving a further sign for further decline to come. 

In today’s trading this level was broken as well. The next support is at EUR 6.17, a local low from 1 June. 

We don’t expect any support from the regulatory side as decision makers are on summer holiday. Only positive news about the Eurozone and the macro economy might offer some kind of support for the price in the coming weeks.

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