Thursday, August 30, 2012

Carbon felt on overbought market - finding new support

As the news emerged that Australia will link its ETS with the European one, there was a buying spree on the carbon market - which might have coincided as well with bulls attacking the most recent high of 8.48 from the end of June. But as it turned out that expected demand for EUAs from Australian market will be marginal - not enough to save the EU ETS from its supply, the bears stepped in to halt the rally.

The shooting star initiated a decline in the EUA Dec12 yesterday. The price fell to the 61.8% Fibonacci retracement level and this was the first time it fell from the increasing trend channel. Open interest decreased from 0.375mn to 0.374mn, but the RSI is in neutral territory at 52.3. Perhaps even more than the bears selling at the high, it was those who were buying carbon all the way up that started to realize their profits and selling their length.

We are down some 76c in two days (~ -9%) at 7.71/7.75 and perhaps at a crucial support/resistance. This level is a Fibo and also you can see here many DMA are crossing. We have support from 200 DMA. 45 DMA and 20 DMA. Given the fact that also power prices went marginally down, this can be again an interesting level for utilities to buy some carbon they need.

Technically, yesterday we saw two selling signals (in red) - please compare to the buying signals (in blue) during the increasing trend.

Friday, August 24, 2012

Time for a correction

Time for a correction

Global markets give a bearish sign today.
Asian markets and European futures are in the negative territory, US futures close to zero and the dollar is appreciating.
The Brent was some 50 cents lower than yesterday’s closing price early in the morning. And the USD is appreciating 0.3% versus the EUR.

Markets went up quite a lot this week, investors, therefore might decide for profit taking on the last trading day of the week.
In addition, yesterday’s data signaled that the jobs market and consumer confidence remain weak in the US.  Jobless claims rose by 4,000 for a second week to reach 372,000 in the period ended Aug. 18, Labor Department figures showed. Consumer confidence dropped last week to the lowest level since January.

German Chancellor Angela Merkel and French President Francois Hollande will meet with Greece’s prime minister today and tomorrow to discuss the pace of reform.

At the same time, the EUA Dec12 is in an increasing trend.
The Relative Strength Index is at 67.5, so there is still room for some appreciation before it reaches the overbought territory.
Open interest increased day by day and is now above average.
The MACD is above zero and the 20-day moving average got above the 30-day moving average two days before which is a bullish sign as well.
Next resistance before the EUA Dec12 is the local high at EUR 8.48 hit on 29 June.

The price appreciation, however, got even faster in the last days, the price broke out from the trend channel. The price started a correction already today in the morning, as it opened 1.7% lower than yesterday's closing price.
The first support level can be found at EUR 8.0-8.02, the next at EUR  7.75-7.80.

Friday, August 17, 2012

There is always a reason to party

We expected a rather quiet week, and were surprised by the market activity. Until yesterday’s close the benchmark EUA Dec12 contract appreciated 7.5% from last Friday. The first two weeks of August show an increasing trend channel. The MACD gave a buy signal 6 August already and reached the positive territory this Wednesday. The Relative Strength Index (RSI) that on the last day of July was at 30.6, is now at 60.49, but there is still room enough for further appreciation.

In the lack of regulatory news global market environment is influencing the carbon prices. In the beginning of the week oil prices were supporting carbon as Brent oil went above USD 115 due to a drop in output in the North Sea, supply worries in the Gulf of Mexico and a decline in US crude oil inventories. In addition, European power prices went up partly because of problems at a Belgian nuclear power plant.

After a correction on Wednesday the market got new impetus from German Chancellor Angela Merkel yesterday saying that her government would support ECB President Mario Draghi in saving the life of the Euro.

The EUA Dec12 managed to come over the 30-days moving average (at EUR 7.30), and yesterday it went over the 200-days moving average (at EUR 7.70) as well, but here a fight seems have started. The price tried to break this level on Tuesday and Wednesdays already and today it’s testing it back. This can be a natural step given the fact that on Friday market participants might close their open positions and after the price appreciation of the last couple of days some of the traders might put the profit into pocket.

EUR 7.70 (the 200-days moving average) and EUR 7.50 (a support level marked by the opening and closing prices of the last days) might support the prices in a correction. Should the positive trend continue (most likely next week), EUR 8.00 will be the first resistance to combat. This a Fibonacci and a psychological level as well.

Friday, August 10, 2012

Too strong resistance

Carbon failed to break above the resistances created by the DMAs (check our previous Carbon post) and effectively fell below 7.20 euro which seems at the moment to be an important support-resistance. We are now faced with a rather psychological 7.00 euro barrier - there is nothing really that should keep EUA here other than traders perspective of a round number being a good support. Next levels can be 6.85 euro and 6.53 euro.

Tuesday, August 7, 2012

Risk-on and inventories down? Buy oil!

As the risk-on mood across the markets continues and speculators betting that crude oil inventories might have decreased by further 1.5mn barrels after they fell more than 6.5mn barrels last week (data will be released tomorrow) oil advances well above 108.40 (50 Fibonacci level) and this convinced us to go long. We bought into the market just above 110.00 USD and we set the Profit Target at the next Fibo level of 113.19 USD

Where is "the thing"

The emissions market is calm recently as the holiday season kicked in in most parts of the EU and beyond. Generally the markets were in a risk-on mood after Germany signalled that the country would support the ECB’s bond buying programme announced last week. This programme could decrease the financing costs of countries like Spain and Italy.

As the auction schedule debate will only start in autumn, traders' attention is now drawn to any short- to mid-term imbalance in supply and demand and seeking direction from oil, gas, power prices and macroeconomic development in the EU.

Looking from a wider perspective, we haven't seen a new low since 5.99 euro was hit at the break of March and April. Carbon is trading sideways inbetween 6.70 and 7.40 euro - and this is not the level of prices at which power companies would spend extra time and effort to closely follow the market and execute complex hedging strategies.

Ahead of us certain technical obstacles which may prevent the price from further appreciation - I mean the 20 Day Moving Average (DMA) which is now being tested, 45 DMA, 30 DMA and 200 DMA.