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.

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