Friday, February 22, 2013

EUA Dec13: Uncertainty limits upside potential

The EUA Dec13 had an extraordinary rally on Thursday. The start was uncertain and the price fell to a daily low of EUR 4.78 (30-days moving average) that proved as support. From here the price advanced to a daily high of EUR 5.41 and closed at EUR 5.30. Short term technical indicators gave a sell signal by the end of the day.

The rally started on Feb. 19, when the Environment Committee (ENVI) of the European Parliament backed the amendment of the ETS Directive that would authorize the European Commission to intervene in the timetable of the EUA auctions. (A cold snap also helped from the background.)

The Committee however delayed a decision about giving a mandate to its chairman to initiate trilogue discussions that would put the legal process on a fast track.

At the time of writing we still don’t know if the ENVI chairman, Matthias Groote would ask his Committee again for the mandate on their next meeting on Feb. 26. If he doesn’t do so, the opinion of the ENVI goes directly to the plenary of the Parliament for first reading on Apr. 15. In this case there will be no pressure on Germany to come up with a definite opinion on back-loading any time soon. The uncertainty remains in the market and price will be news-driven.

It is very likely that he would ask for the mandate only if he sees a high probability of getting it. In this case there will be a vote next Tuesday and there will be a reason to close the long positions opened in a hope for a positive outcome.

If he asks for the mandate and doesn’t get it, this will be another good reason to close long positions opened this week and take the profit.

All in all, we see limited upside potential for the EUA Dec13. The MACD got closer to the zero line, but is still in the negative territory. The Relative Strength Index (RSI) is in the neutral territory, at 52.4. The next resistance level is at EUR 5.52 (a daily high from Feb. 18) followed by EUR 6.00. Support levels are at EUR 4.80 (30-days moving average, that stopped the price from falling further 15 minutes age when Germany announced that it failed to sell 4.02mn EUAs on auction), EUR 4.56 (20-days moving average) and EUR 4.09 (the daily low from Feb. 19).

Wednesday, February 6, 2013

EUA Dec13: Deflating the ballon

The EUA Dec13 couldn't maintain its recent gains. Last Friday the price jumped almost 30% within the day on the speech of the German Chancellor Angela Merkel at a conference as she supported her environment minister's renewable energy reforms. Mr. Altmeier is known for supporting the backloading. Friday's price movement might have triggered market participants that had a short position from January to close their positions. In addition to this, there were two days (Monday and Tuesday) with excellent auction results that might have helped as well.

On Wednesday the EUA Dec13 opened in a positive mood and reached  a daily high of EUR 4.76 ( a level not seen since Jan. 24), but gave up gains in the afternoon to close at EUR 4.16, 26 cents lower than Tuesday's closing price and 1 cent higher than the daily low.

The MACD still keeps its bullish crossover. RSI is in the neutral territory at 36.7.

It seems that the price tested the higher range of the declining trend channel, but it didn't break it and now it's coming back to the lower end. Support levels are at EUR 4.00, EUR 3.22 and EUR 2.81. The closest resistance is Wednesday's high at EUR 4.76.