Monday, September 10, 2012

EUA might change direction 27 times in the coming days (at least)

We had an exciting day today with the EUA Dec12 moving in an unusual wide range of EUR 7.80-8.50. After the significant price appreciation last week we expected some kind of correction in the morning (stock futures and depreciating euro indicated also a way downwards), but I don’t think anybody calculated with this extent of fall.
There were two pieces of news putting a downward pressure on the price:

- The European Commission (EC) announced having selected the German EEX for its early Phase 3 auctions. All in all 120mn allowances will be sold from last week of October. The only new information I the announcement was the platform, as the amount was known already months ago. The bigger than expected negative reaction shows how nervous markets are.
- In the afternoon Netherlands’ Infrastructure and Environment Ministry said it is unlikely to support the EC’s back-loading proposal as it would be an indirect disadvantage for the countries’ companies (meaning higher costs).

Although Netherlands has only 13 votes in the Commission and at least 91 votes are needed to block the back-loading proposal, the announcement was awarded with a 30 cents fall. This might be an indication on what’s coming in the next days /weeks. Any time a country says its opinion about the proposal, the price can move up or down depending if the country backs or opposes the back-loading.

With today’s move the EUA Dec12 price fell below the 20-days moving average at EUR 7.97 (IRSI fell to 31). If the price cannot return above EUR 8 today, a bearish engulfing would form in the chart (reinforced by a higher than average volume traded today) indicating further depreciation. In this case the support levels would be the 30-days moving average at EUR 7.70 and a local low at EUR 7.55 (the 200-days moving average is here as well). If all these supports prove inefficient, the price can fall to EUR 6.50.

In a positive scenario the price has to climb back above EUR 8.0 first and then the first resistance is waiting at EUR 8.50. The price tried to break above this level already three times.

We have to be prepared for everything, mainly for direction changes…

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