Tuesday, September 18, 2012

Can the CCC bring relief for carbon?

As expected, September started with an increased volatility, but until now the dark candles had a bigger body than the white ones. 

End of last week was very week in the carbon market and this week didn’t start strong either. The price of the EUA Dec12 contract fell below the 200-days moving average and couldn’t recover. In addition the MACD that gave a sell signal in the beginning of last week today fell below zero. Another bearish sign. 

The increasing trend channel started after the European Commission published its draft about back-loading was broken last week and the price heads south since then. Couple of news drew market participants’ attention (again) on the increasing supply by the end of the year (early phase 3 auctions, NER sales etc.). Expected transfer delays thanks to the software update of the union registry brought further sellers to the market.

Everything indicates further depreciation at the moment. The RSI is currently at 38.5, so there is some room left to the downside. The closest support level is at around EUR 7.0 followed by EUR 6.53 (a local low from end of July). The lower Bollinger band is at EUR 7.11 and the EUR 7.0 worked as a good support in the first weeks of August.

Although no decision is expected from the Climate Change Committee’s (CCC) 60th session tomorrow, positive comments might bring some relief for the prices. (Negative comments could cause further decline, of course.) Reaching the lower Bollinger band might also be a support.
In the case of a correction, the earlier support levels will function as resistance. These are at EUR 7.53 (200DMA), EUR 7.80 (30DMA) and EUR 8.0 (20DMA and psychological level).

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