Tuesday, April 9, 2013

EUA Dec13: Another speculative wave before the plenary vote about back-loading?

After finding a nice support level near EUR 3.50 in March (76.4% Fibonacci retracement level calculated based on the historical low January 24 and the local high since then February 18), the EUA Dec13 started to trade in a climbing trend channel.  (See chart) The MACD signaled the start of the increasing trend on March 21, when the MACD crossed the signal curve. Yesterday the 20-days moving average came close to the 30-days moving average. It is generally a bullish signal, if the first one crosses the second one from below.

Today, however this bullish signal got in danger, as the price plummeted from EUR 5.03 to EUR 4.66 after news reported that the majority of the biggest group of the European Parliament (EP) rejects the amendment of the ETS Directive. The EP plenary vote on April 18 can clear the way before the back-loading or make it politically dead.  The price fell from the trend channel and couldn't climb back above EUR 5.00 until the time of writing. (15:11 CEST)

The price movement of the last couple of weeks and of today shows very well that the most important factor influencing the price of carbon is the political decision about back-loading (and the expectations related to it). The closer the date of the vote, the higher the volatility of the price might be.

The upside is expected to be limited as
a. There is a huge uncertainty regarding the outcome of the EP plenary vote.
b. The positive outcome, on the other side, is mainly priced in at these levels already.

The first resistance level is at EUR 5.27, a local high hit yesterday followed by EUR 5.52 last seen before the ENVI vote in February.

The first support level is at EUR 4.88. This is the 23.6% Fibonacci retracement level and the price is here at the time of writing. The 38.2% Fibonacci retracement level is at EUR 4.48 very close to the EUR 4.41 level where the 20- and 30-days moving averages are waiting for a direction.

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