Monday, July 16, 2012

EUA waiting for regulatory news

After the rally seen in June the EUA Dec12 retreated in the last couple of days. 

Market participants are waiting for the report from the EC on the status of the EU ETS that is supposed to contain suggestions for improvement of the scheme (back-loading, set-aside etc.). On 29 June, the benchmark contract  managed to reach EUR 8.48 and to break above the 200-days moving average, something we didn't see since the beginning of 2011. Hopes on news from the regulatory side of the carbon market were completed by announcements of the EU summit. The measures approved June 29 have the aim to facilitate recovery of the PIIGS countries without increasing the debt of them.

By the end of June the Relative Strength Index (RSI) of the EUA Dec12 stood at 74-75. A level above 70 shows that the asset is overbought. News about a possible postponement of the publication of the long-awaited report and opposition from certain member states against the EU package which could help indebted countries pushed the EUA Dec12 price below the 200-days moving average again and a decreasing trend started (red line). The MACD gave a sell signal 9 July. Last Friday, the price fell to EUR 7.46, slightly below the 30-days moving average, but by the end of the day it managed to close above this level, at EUR 7.65.

The Commission is working until 25 July. This is therefore the last day when the report might be published. 

At around EUR 7.60 we can find several technical levels, which might make it as a strong support. The 30-days moving average (green curve) is at EUR 7.57 and the 38.2% Fibonacci retracement level is at EUR 7.60. It was a strong resistance level earlier as well (yellow horizontal line). 

If this level breaks, the price has to fall through the 50.0% Fibonacci level at EUR 7.32 and might easily reach EUR 7.0-7.05. In a positive scenario (macro data showing economy to recover, comments from the European Commission), the price might bounce back to the 200-days moving average which is now at EUR 8.10 (yellow curve).

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