Monday, December 22, 2014

EUA Dec15: Christmas consolidation after rally

The candles from Monday and the Friday before formed a bullish engulfing. In addition the price closed above the 30DMA, for the first time for seven days. The positive momentum persisted until Wednesday when the price hit a new weekly high at 7.19 euro. This level was retested on Friday, but in the last two trading days the price moved in a narrow range of 13 cents. Volume was lower than the December average as most of the traders are preparing for Christmas already.

The 20 and 30DMAs met at the 7.00 euro level this morning.

The MACD crossed the signal line on Friday reinforcing the positive momentum although further gains might be limited by the low interest before the holidays.

Monday, December 15, 2014

EUA Dec14: Option price gravity pulled the price to 1M low

After falling below key support levels the week before, the price remained under pressure last week. The EUA Dec14 moved in a narrow range of 9 cents on Monday as the compromise report of the ITRE rapporteur on MSR didn't contain any major surprises for the market participants. On Tuesday the price tested Monday’s low at 6.58 euro, but by the end of the day buyers helped it recovering. 

Wednesday was the most exciting day as after retesting the 30DMA the price fell below a local low, a Fibonacci retracement level and the 50DMA. Due to option expiry and rolling-over of positions to next year the movement was supported by a significant volume. When an option expires, the market price tends to move in the direction of the strike price of the most actively traded option. EUA options expired yesterday and there was a significant interest in that with a strike price of 6.50 euro. The low hit during the day at 6.45 euro remained a good support level for the rest of the week.

Thursday brought a correction and the price approached the 30DMA, but didn’t reach it. The price took a downward path on Friday and fell to 6.56 euro, but buyers appeared in the afternoon and made the price closed at the same level it finished the previous week.

The price moved in a narrowing triangle since last Wednesday. The question is which direction it takes when breaking out. The MACD gave a bearish signal today when it slipped below the zero line. Further losses can however be limited by the support level at last week's low at 6.45 euro. In the lack of major price moving news (no major announcement about the MSR expected until January, auctions halted from Wednesday) the price might move in a range between 6.45 euro (last week's low) and 6.83 euro (30DMA).

As the Dec14 contract is last traded today, from next week on our levels will change slightly as the Dec15 contract becomes the new benchmark.

Monday, December 8, 2014

EUA Dec14: Increasing trend channel broken

The new German Climate Action Plan and the lack of directional signals from last week's ENVI and ITRE meetings pulled the EUA Dec14 out of the increasing trend channel.

The EUA Dec14 closed the first trading day of the last week with a gain of 3 cent, but it visited the levels below 7 euro during the day after the MACD crossed the signal curve on the Friday before. The report of the International Energy Agency (IEA), however, helped the price in recovering.

On Tuesday, before two key meetings traders opted for closing  long positions and after hitting a daily high at 7.13 euro, the price fell below the 20DMA at 6.91 euro. Thanks to this move the price fell from the increasing trend channel.

On short term (on the 1h chart) the price became oversold, so we expected a correction on Wednesday and exactly this happened. During most of the day the price was captured by the 20 and 30DMAs, a short test of climbing above the 20DMA failed after the German government accepted the new Climate Action Plan which has the aim to reduce CO2 emissions by almost 80 million tonnes by 2020.

The 20 and 30DMAs defined the price movement on Thursday, but on Friday the 30DMA was broken given another bearish sign that the price could fall to 6.50 euro.

The first support level is near 6.50 euro with 6.55 being a Fibonacci retracement level, 6.53 a local low and 6.49 the 50DMA. Carbon options expire this Wednesday on ICE. If sellers of call options with a strike price of 7 euro or higher decide to cash in, there might be a selling pressure on the price.

Any upside might be limited by the 30 and 20DMAs at 6.79 and 6.92 euro, respectively.

Monday, December 1, 2014

EUA Dec14: Increasing trend channel in danger?

The EUA Dec14 tested both the resistance level near 7.11 euro and the support level at 7 euro last Monday. The result was a doji candle by the end of the day indicating the hesitation of the market about which direction to take. 

On the next two days however, the benchmark contract managed to hit new local highs reaching a 9 month record at 7.21 euro on Wednesday. At the same time the relative strength index climbed above 70, the signal of overbought prices. 

The losses on the last two days of the week therefore didn’t come as a surprise and the fact that the price closed above 7 euro is a positive sign.

The increasing trend channel is still intact. The price would have to fall to the 20DMA at 6.88 euro to leave the trend channel. The MACD crossed the signal curve which is a bearish signal at the moment.

Market will have an abundant supply of 10.5 million EUAs this week with an auction every day. 

This is worsened by the general negative mood in the market. Brent lost more than 12% last week reflecting the decision of OPEC about not cutting production levels despite record low prices. Markets are expecting a price of 60 dollars, the last price today was 69.07 dollar. The first statistics of the Black Friday sales show that huge discounts were not compensated by volumes. Sales therefore were significantly lower than in 2013 further worsening the investor sentiment.

E.ON announced on Sunday plans of splitting its business. Difficulties the European energy sector faces these days forced the company to form a new unit for power generation, energy trading and upstream businesses. The main focus of the company would be its renewable activities, regulated distribution networks and tailor-made energy efficiency services in the future. The step of Germany's biggest utility is an indication for the future trend and might be an example for other peers. For the carbon market, the step suggests decreasing demand for allowances.

The strongest support level seems to be now the 20DMA at 6.88 euro. The lower edge of the trend channel is also close to this level. Below this level, at 6.80 there is a Fibonacci retracement level, followed by the 30DMA at 6.70 euro. 

The meetings of ENVI and ITRE on Wednesday and Thursday might provide some support to the price like we saw it in November. For this to be the case it would be necessary that MEPs show a strong will to reform the EU ETS.

If the benchmark turned up again, the first resistance it had to overcome would be the 7 euro level. This is followed by last week's high at 7.21 euro. The upper Bollinger band is the next resistance level at 7.32 euro, before the price could retest 2014  high at 7.41 euro.

Monday, November 24, 2014

EUA Dec14: Setting comfort zone before key events

Last week started with retesting the 20DMA after the report of the MSR rapporteur Ivo Belet contained a starting date of 2021 disappointing those market participants who hoped for an early implementation. By the end of the day, however, the EUA Dec14 managed to hit a new 8-month high. 

A new local high was reached on the following two days as well pulling the relative strength index (RSI) close to overbought territory. Other factor suggesting a correction was the bearish engulfing which was formed on Wednesday and Thursday.

The contract felt comfortable in the 6.86-7.08 range last week. The increasing trend channel is still intact, but if the price tests the 20DMA at 6.71 euro, the trend might be broken. A Fibonacci retracement level is also near here reinforcing the importance of this level.

The upper Bollinger band (now 7.13 euro) worked as a good resistance last week and could limit gains to the upside this week as well. This is followed by local highs at 7.13 and 7.33 euro, before the 2014 high at 7.41 euro is reached.

The deadline for MEPs in the ITRE committee of the European Parliament expires today at noon time. The content of the amendments might make the EUA Dec14 retesting some support or resistance levels. 

The second half of this week might see low volumes as part of the market will be in London at an annual conference of energy traders. Other part of the market might simply take the last two days of due to the celebration of Thanksgiving and the start of Black Friday in the US. On days like these volumes might be low, but if trading books dry out, it could be easier to cause bigger volatility in the market.

Next week will be busy again with Germany deciding about the closure of some hard coal and lignite-fired power plants which might and the ENVI and ITRE discussing the market stability reserve. 

Monday, November 17, 2014

EUA Dec14: End of gains?

Despite gains in German power and fuel prices the EUA Dec-14 contract closed Monday’s session at 6.72 euro, some 0.04 euro lower compared to the previous close, but the increasing trend channel remained unhurt. The benchmark contract then reversed the losses on Tuesday and reached a new seven month high at 6.83 euro. Most of Wednesday’s trading hours were spent with sideways movement, but buyers invaded the trading floor and pulled the price to 6.73. The RSI went above 69 on that day, approaching overbought territory. 

Wednesday's candle, however, looked like a “Hanging Man” candle which usually indicates waning bullish demand. Thursday’s doji candle was other sign about market hesitating which direction to take and the long-awaited correction seemed to have started on Friday. 

Some traders might have closed long positions ahead of the meeting of the European Parliament's Industry Committee (ITRE) where a draft opinion about the market stability reserve will be discussed. Market remembers ITRE's role in the back-loading approval when the first rejection in January 2013 sent down the front year contract below 3 euro. 

The MACD started to approach the signal curve, but didn't cross it yet. The RSI took some distance from the overbought territory. 

The increasing trend channel that started on 3rd October is still unhurt, but the price is close to the lower end of the channel. If it came below 6.60 euro, the channel would be broken. The next support level is at 6.52 euro (the 20DMA). This is also a local high from August when the auction volume was halved. 

Should market interpret the amendments of the ITRE in a positive way, the first resistance level to test is last week's high at 6.86 euro followed by the upper Bollinger band at 6.94 euro. 

Monday, November 10, 2014

EUA Dec14: Nothing can stop the rally?

Interestingly, the EUA Dec14 formed three bullish engulfing forms during the last week providing a strong bullish signal.

On Monday the appreciation was helped by an increased demand from the utilities' side as workers at French utilities went on strike and reduced power generated from nuclear and hydro. The 3.6% d/D jump seemed exaggerated and we saw a correction on Tuesday, but the support level at 6.44 stopped the benchmark contract.

At the stakeholder consultation in the ENVI Committee on Wednesday there seemed to be a broad support for the implementation of the market stability reserve, although participants recognized that the parameters of the measure might change compared to those proposed by the European Commission in January. France for example joined the group of those countries supporting an early implementation of the reform. Also the industry committee of the European Parliament (ITRE) seemed more cooperative than in the past when back-loading was on the table. Its vice chair said that an early implementation is necessary in order to avoid zigzags in the price when back-loaded allowances return to the market. They therefore also support putting the back-loaded allowances directly into the reserve.

The increasing trend seems to be unstoppable. Also the calendar for this week only contains items that might rather support the price instead of pushing it down:

- There will be only four auctions this week with a total volume of 8 million allowances, some 2.5 million less than last week.
- The new Commissioner for Climate Change and Energy will be guest in the ENVI Committee on Tuesday. In his parliamentary hearings before his election he seemed very supportive for the reform of the ETS. If he repeats his commitments, it might have a positive effect on the EUA price.

It is important to mention however, that the relative strength index at 69 shows that the price might be close to overbought territories, and a correction or consolidation might be in the cards.
The price is trading near the upper Bollinger band and also close to the upper edge of the increasing trend channel that formed early-October without any retest.

Should the positive momentum persist, there is no real resistance before the 2014 high at 7.41 euro, only the psychologically important level at 7.00 euro.

In the case of a correction the first support could be the former resistance near 6.44 euro. This support level is followed by the moving averages: 20DMA at 6.37 euro, 30DMA at 6.20 and 200DMA at 5.94 euro.

Monday, November 3, 2014

EUA Dec14: Consolidation after Council conclusions and before ENVI meeting

The positive news about an unanimous agreement in the Council about the 2030 targets pulled the EUA Dec14 to 6.44 euro and the RSI to 67 on 24th October. The price even checke dterritories outside the upper Bollinger band. This made a correction in the first days of last week likely. 

The price fell to 6.27 on Monday and hit a daily low at 6.15 on Tuesday. With latter move the increasing trend channel which started in October seemed broken, but thanks to utility activity the price rallied in the late hours of Wednesday which made us simply widening the trend channel.

Thursday started with breaking the resistance level at 6.44, but the outlook of an agreement between Russia and Ukraine about gas deliveries pushed the price lower in the afternoon and the result was a doji candle indicating hesitation of the traders. 

Friday's black candle seemed to confirm that the price is more likely to stay in its comfort range than breaking to new highs.

We might see further sideways movement in the first half of the week. The relative strength index (RSI) came down to neutral territory (56).

The first support level is at 6.19 euro, the 20DMA. If the price falls below this level, it leaves the increasing trend channel (again). The next support level might be the 30DMA at 6.05 euro followed by the 200DMA at 5.91 euro. In the last two weeks the 50DMA which is now at 6.10 euro proved a good support level.

Wednesday's stakeholder consultation in ENVI about the market stability reserve (MSR) might influence the price in the second half of the week depending on the opinions of the participants. If there seems to be a strong support for the early implementation of the MSR, the benchmark contract might retest the local high reached last week at 6.47 euro and even increase further to the next resistance level at 6.51 euro.

Our base range for the week is 6.19-6.47 euro, while the wider range might extend between 6.05-6.51 euro.

Monday, October 27, 2014

EUA Dec14: Consolidation likely after recent rally

Despite some negative signs, the EUA Dec14 hit a 7-week high last Friday at 6.44 euro. First there was the bearish engulfing from the 17th of October followed by a doji candle on Tuesday indicating uncertainty of traders about where the price might head. On the other hand, the 20DMA crossed the 30DMA on the same day giving a bullish signal. The 6.27 level was tested three times before it got broken on Thursday. From now it should work as a support level and the first test happened already on Friday when the benchmark hit a daily low at 6.28 euro.

The MACD climbed higher in the positive territory, but the RSI at 67 is a warning signal that despite the supportive factors (like the looming discussions about the MSR which will be a new opportunity to trade on) the price might consolidate at current levels for the time being.

Based on technical analysis the EUA Dec14 is in an increasing trend especially after receiving a positive impetus from the Council conclusions last week. The next resistance level is at 6.51 euro, but the relative strength index is close to the overbought territory which makes some consolidation more likely for the next couple of days. Speculation on the MSR negotiations starting in November might take off in the second half of the week.

Monday, October 6, 2014

EUA Dec14: Friday's rally promising, but downward trend unhurt

The first candle of last week formed a new bearish engulfing with that from the Friday before. Despite opening near 6 euro, the price ended the trading on the 200DMA. On Tuesday and on Wednesday the benchmark closed above the moving average, but on Thursday the price fell sharply and ended below the 200DMA. The downward momentum remained valid on Friday morning as well. The price started the day with sharp losses and came close to the local low from the 7th of July (reaching a daily low at 5.48 euro) to recover later, shortly before the market closed.

The declining trend however remained untouched. The price almost reached the lower end of the channel on Friday and also the RSI came close to 30 suggesting that a correction might be in the cards, but a trend reversal cannot be seen at the moment. 

This week more 10.5 million EUAs will be offered via auctions, almost the double of last week's volume. This abundant supply might exercise a negative impact on the price.

No major announcements are expected from the policy side either meaning a missing support for the price.

Next year delivery coal fell to an almost 5-year low recently which should in theory support the carbon price, but the strengthening of the US dollar versus the euro (and other currencies) stops traders to buy the heavily polluting commodity.

As a consequence sideways movement is the most likely scenario for this week within the range of 5.45 and 5.79 euro. In order to break the declining trend channel the price should reach levels above 5.79 euro (the 200DMA). 

Support levels are at 5.12 (Fibo), 5.45 (local low from 7th July), 5.48 (last week's low), 5.56 (Fibo).
Resistance levels are at 5.79 (200DMA), 5.89 (20DMA), 6.04 (30DMA).

The MACD is in the negative territory and below the signal line. RSI is close to the oversold territory (39). 

Monday, September 29, 2014

EUA Dec14: Short-term declining trend channel couldn't be broken

The warning signals from the third week of September (the 20DMA crossing the 30DMA and the bearish engulfing of the Friday-Monday candles) proved to be correct. The EUA Dec14 fell below the 200DMA on Tuesday and hit a 3-month low at 5.63 euro after the new rapporteur of the market stability reserve proposal Ivo Belet published the preliminary timeline of the approval process. According to the current plans the ENVI would first vote about the reserve in February 2015.  The date seemed to be later than market participants expected and traders sent the price down sharply. The more than 5% decline was followed by a correction on Wednesday, but gains were capped at 5.82 euro. 
The Director General for Climate Action Jos Delbeke said later during the week he believed the market stability reserve could be law by June-July 2015.  This statement and the outlook of less allowances to be auctioned this week (no UK auction on Wednesday and Friday's German auction has been cancelled due to a national holiday) helped the price in recovering on the last days of the week. 
From the first days of September a short-term declining trend channel forms in the chart. The depreciation accelerated last week and the price fell below the lower Bollinger band. The RSI  touched 32 last week suggesting that there is a chance for a correction. This however does not necessarily mean the reversal of the trend. To break out of the channel the price has to reach 5.95 euro at least and stay above this level which didn't happen until now.
After Friday's appreciation the MACD moved closer to the signal curve, but it wasn't able to cross it and remained in the negative territory. The RSI is in neutral territory (at 42). 
Traders disappointed by the lengthy procedure of the market stability reserve and potential negative comments by the ENVI and ITRE committees about the Climate Action and Energy commissioner designate Miguel Arias Canete might push the price down to the 200DMA at 5.77 euro again. If the moving averages cannot stop the fall, the next support level is last week's low at 5.63 euro. 
The reduced auction volume of this week however might provide support to test the upside. Resistance levels can be found at 6.03 euro (the 20DMA), 6.07 euro (last week's high) and 6.15 euro (30DMA).

Monday, September 22, 2014

EUA Dec14: Politics and auction volumes to define the range for this week

The doji candle on 11th September was followed by a bearish engulfing next day. Also the MACD arrived to the negative territory on that Thursday. So it was no major surprise that the EUA Dec14 slipped quickly below 6 euro last week thanks especially to the narrowing clean-dark spread in German power. The 20DMA crossed the 30DMA on Wednesday giving another sell signal. On the same day however the price reached the 200DMA quickly which proved a good support and turned back the benchmark contract to 6 euro. The round number represents a psychological level and a Fibo level as well (taking 2014 high and low).
Since the beginning of September the price formed a declining trend channel the upper end of which was touched, but not broken on Friday.
This week the ENVI will vote about the objection to the 2015-2019 carbon leakage list which in case of adoption could have a bullish effect on the EUA price. The chances however for the objection to pass the plenary are low as the Green Group's votes won't be enough to get absolute majority.
The five auctions on the other hand (offering a total of 10.5 million EUAs) could exercise a pressure on the price and not let it above the 20 and 30DMAs at 6.18 and 6.23 euro, respectively.
There seems to be still a hope for the market stability reserve to come into force, which might keep the price above the 200DMA (at 5.75 euro at the moment) which is the closest relevant support now.

Source: Bloomberg Finance L.P.

Monday, September 15, 2014

EUA Dec14: MACD slipped into negative territory

As we wrote last Monday the technical picture worsened in the first week of September and things didn’t get any better last week either. The EUA Dec14 fought with the moving averages on Monday, but gave up in the days after and fell even below the critical 6 euro level on Friday to an intra-day low at 5.97 euro (here is the lower Bollinger band now). 
Market participants might have been waiting or comments from the Working Group on environment of the European Council on Monday as the price moved in a narrow range and the volume didn’t reach 10 million until 17:30pm CEST, but politicians told 30 minutes before the market closed that they would need two weeks to draft their positions. The German proposal leaked out later during the week suggesting a 2018 start only, one year later than the country’s position was in summer.
Coal prices in euro terms increased after the European Central Bank rate cut, while gas prices dropped as the EU delayed the implementation of new sanctions after the ceasefire had been signed in Ukraine. These led to the dark spread losing from its advantage relative to the spark spread since the beginning of September. As a consequence the EUA Dec14 got on a downward trend.
On Thursday the MACD slipped into negative territory giving another bearish sign for market participants. The only fact that could give some hope for a correction is that by the end of the day  the EUA Dec14 managed to climb back above 6 euro again. On the other hand, news reported today in the morning that the ceasefire didn't bring any solution and that fights in Ukraine continued during the weekend pushing gas prices up.

The RSI is at 41, so a retest of the 5.97 level cannot be ruled out. 6 and 5.97 are the first support levels followed by a local low at 5.75 from the beginning of August.
To the upside the first resistance is at 6.15 which stopped the price increase twice last week. The 30 and 20DMAs are the next resistance levels at 6.26 and 6.30 euro, respectively.
The price fell from the major increasing trend channel and turned down. In the lack of support the price might retest the 5.75 euro level, while to the upside the 6.15 euro resistance has to be broken first.

Monday, September 8, 2014

EUA Dec14: ECB rate cut pushed down dark spread and carbon

The EUA Dec14 moved in wide range of 19 cents last Monday leaving a long-legged doji by the end of the day. This candle indicates a possible shift in the trend after the carbon price booked a 2.9% increase in August. The next day’s range was narrower (8 cents only) and the price remained above the support levels. On Wednesday the 30DMA at 6.25 euro halted the price, but on Thursday both the 20 and 30DMA were broken and the price hit a daily low at 6.09, a level not seen since 13 August. 
The move came after the ECB surprised markets by announcing a 10 basis points cut in its benchmark rate to 0.05% which caused a sharp fall in the EUR/USD. The weakening of the euro made coal which is traded in US dollar more expensive. Consequently, the dark spread which improved in the last couple of weeks reversed its increasing trend and  dragged the carbon down as well. The EUA Dec14 lost almost 4% on Thursday only. 
The weekly low was reached on Friday at 6.06, but news about Council working group for environment discussing the MSR helped the price in recovering. The 30DMA worked as resistance though. 
The MACD approached the zero line, but the RSI also came down rapidly to 41. The first support level is at 6.00 (a Fibo level, the lower Bollinger band and also psychologically important) followed by the August low at 5.75 euro. The former support levels became resistances at 6.27 (30DMA) and 6.33 (20DMA).

Monday, September 1, 2014

EUA Dec14: Will utility demand be able to counterbalance increased supply?

The EUA Dec14 moved in a relatively narrow range between 6.22 and 6.48 euro last week. Traders were away from markets on Monday which was a banking holiday in the UK. The first candle of the week formed a bearish engulfing with that from the Friday before, but the low volume didn’t support a bearish view. The price tested the 20DMA on Tuesday and the 30DMA on Wednesday. Latter proved a good support and turned the price back upwards. The weekly high was reached on Thursday. On the last day of the week many traders might have opted for taking profit and the price closed down 4c d/d.
The increasing trend seems unhurt, but there are warning signs: (a) the 6.50 level couldn’t be broken last week, (b) RSI is at 60 and (c) the auction volume will double from this week on. The question is if the demand from utilities would be able to counterbalance these hurdles.
The closest support levels are at 6.29 (20DMA), 6.25 (30DMA), 6.22 (last week's low) and 6 euro. To the upside 6.48 is last week's high and 6.51 euro from the week before.
The MACD crossed the signal curve last Monday giving a bearish signal.

Monday, August 25, 2014

EUA Dec14: Taking a break before bigger volumes come

The EUA Dec14 spent most of Monday between 6.35 and 6.40 euro without taking any direction and forming a doji candle. Tuesday however bought a new 5-month high at 6.47 euro which was beaten then on Wednesday at 6.51 euro. Traders opted for profit taking on Thursday after the new local high was reached. Friday brought another doji candle indicating that the price is looking for direction.
6.50 will work as a resistance this week. Those who bought below or at 6 euro, might opt for taking profit. Two technical levels “meet” here as well. The upper Bollinger band at 6.487 and a Fibo level at 6.54.
By Thursday the RSI came close to 70 and on Friday it fell to 59 indicating that a downward correction might be in the cards. Although this week's five auctions will still offer the halved auction volumes, there will be one auction more than last week and from next week on auction volumes will double. The increased supply might exercise a downward pressure on the carbon price. The closest support levels are at 6.24 (20DMA), 6.19 (30DMA) and of course 6 euro.
The activity along the forward curve and significant volumes traded in EFP might be a sign of utilities returning to the market. In the case the increasing trend continues, the first resistance level after 6.50 is at the psychological level of 7 euro, followed by the 2014 high at 7.41.
All in all, we have a neutral view for the EUA Dec14 this week, but it is worth mentioning that any deterioration in the conflict between Russia and Ukraine or the eruption of the volcano Bardarbunga (seen as a risk not only by airlines but also by industrials) can modify the picture significantly.

Monday, August 18, 2014

EUA Dec14: New 5-month high reached on Friday

After the huge fall the week before, the first day of last week brought a correction to the carbon market and the EUA Dec14 climbed back above the 6 euro level (and the 20 and 30DMAS at 6.14 and 6.04 euro, respectively). 
The direction was not that clear on Tuesday, a simple doji was built, but the price adhered to the 20DMA. 
Wednesday was more exciting again as the strong UK auction and lessening worries about geopolitical tensions helped the price to test the 30DMA at 6.04 euro. It climbed to 6.27 euro in the afternoon and closed just 2 cents lower.
Thursday formed other doji candle indicating some hesitation before the resistance level at 6.36 euro which was finally broken on Friday.
The MACD crossed the signal curve on the same day. The RSI is at 62 which might make investors more cautious in the near future.
Strong auction results and/or military action in Ukraine might make the EUA Dec14 test the first resistance level at 6.42 euro (last Friday's high). The upper Bollinger band is at 6.45. This is followed by 6.54 euro, a Fibonacci retracement level.
If geopolitical tensions calm down, the price could retest the support level at 6.36 euro and the 20 and 30DMAs at 6.19 and 6.10 euro respectively. The most important support level is still the 6 euro. Below that 5.90 and 5.75 could stop a depreciation.

Monday, August 11, 2014

EUA Dec14: Reduced auction volumes didn't help to new highs

The technical picture worsened last week. The price was not able to hit a new high in the first half of the week and therefore the MACD crossed the signal curve on Tuesday and gave a sell signal. The EUA Dec14 fell from the increasing trend channel on Thursday.
The big breakthrough (in a negative sense) happened on Thursday when negative message of the ECB President woke risk awareness in investors. Mario Draghi detailed his worries about the economic recovery in Europe. The price fell below 6 euro which proved a good support until Thursday (it was not only a psychological level, but also a Fibo level and the low from the week before). 
The price of the benchmark contract fell further on Friday and hit a 3-week low at 5.75 euro when headlines reported that US aircraft hit Islamic State artillery in Iraq.
Other market participants attributed the fall simply to traders reducing long positions after the price was not able to hit new highs despite the reduced auction volumes in August.
It is difficult to find any support levels above 5.52 euro (the 200DMA). Last week's low at 5.75 euro could work as support this week. The lower Bollinger band at 5.62 euro could also maintain the fall. 
The first resistance level is at 6.00 euro followed by 6.13 euro and last week's high of 6.36 euro. 
The RSI on the other hand is still in the neutral territory at 48.

Monday, August 4, 2014

EUA Dec14: Cautious increase in the cards

The EUA Dec14 hit a new multi-month high at 6.29 euro on Monday opening the room for hopes for further appreciations. Tuesday however brought sellers to the market and the two candles from Monday and Tuesday formed a bearish engulfing that made market participants more cautious. The reduced auction volumes in August however provided a good support for prices in the secondary market and the price posted modest gains in the next three days. Although Wednesday and Thursday didn't bring any new highs, the benchmark contract reached 6.36 euro on Friday, a level not seen since mid March.
The technical picture is positive as the EUA Dec14 continued both in the short and mid-term increasing trend channel. The price touched the upper Bollinger band last Thursday and the RSI at 62 indicates that a correction might be in the cards, but overall the trend goes upwards.
First support is near 6.25 euro which was a good resistance level during the last week. This is followed by the 6.15/6.17 euro level, a multiple low from last week. The 6.00 euro level is still very important being a Fibonacci retracement level, a psychological level and the lowest price hit last week.
On the upside 6.54 euro is the next resistance (a Fibonacci retracement level) followed by the 2014 high at 7.41 euro.

Monday, July 21, 2014

EUA Dec14: Cautious appreciation with halved auction volumes looming

The EUA Dec14 is moving in a slightly increasing trend channel. The four white candles from last week helped the MACD crossing the signal curve giving another sign for further appreciation. Friday’s candle however forms a bearish engulfing which might indicate a halt to the further appreciation or the start of a correction. 
The range between 5.40 and 6.24 euro was the comfort zone of the benchmark contract in the last two months. Auction volumes will be halved in August which might have a positive effect on prices, if the utilities are actively hedging. In the absence of the utilities the price might move sideways, as the ENVI won't start the negotiations about the Market Stability Reserve before the members return from their summer holidays. 
The RSI is still in the neutral territory (at 58).
The next resistance levels are 6.24 (last week's high)/6.27 euro (a local high from 24 March) and 6.54 euro (a Fibonacci level calculated from 2014 high and low).
From the downside 6.00 euro (a psychological and a Fibonacci level) and 5.90 euro (the low from last Thursday and also the 20DMA) can support the price. The 30DMA at 5.80 is the next level.

Monday, July 14, 2014

EUA Dec14: Looking for direction in the absence of major news

The candle from the 4th of July broke the slowly increasing trend channel and the close below 6 euro made traders more cautious. The MACD crossed the signal curve giving a selling sign. The depreciation continued on Monday and the price fell below all moving averages before stopping 5 cents above the 200DMA. After falling more than 10% the price started a correction on Wednesday and the two last candles formed a bullish engulfing. This was however only enough to start a range bound trading between 5.60 and 5.84 euros in the last three days of trading. RSI is in normal territory (52).
If the price breaks out of this range, the first resistance to break is at 5.93 euro and the strongest support is the 200DMA at 5.41 euro.
All in all, the technical picture is neutral at the moment.

Monday, July 7, 2014

EUA Dec14: The technical picture turned gloomy on Friday

Monday’s bullish start helped the EUA Dec14 hitting a new 3-month high, but the benchmark contract failed to break the psychological level at 6 euro. The momentum remained on Tuesday as well and the price broke the 6 euro level which was a Fibonacci retracement level and is also important from the psychological point of view. On Wednesday the price fell just for a short time below 6 euro, but hit a new 3-month high at 6.13 euro later during the day. After five white candles the RSI came close to 70, level indicating overbought prices and we didn’t have to wait for the reaction. Although the 20DMA crossed the 100DMA on Thursday, the price closed down 8 cents.

The slow upward trend that started mid-May was broken on Friday. The EUA Dec14 fell through important support levels: (1) 6 euro: was not only a psychological level, but also a Fibonacci retracement level, (2) 5.93 euro: a local high from 24 June, (3) 5.74 euro: the 20DMA, (4) 5.71 euro: the 100DMA.
Last Wednesday the Relative Strength Index was close to the overbought category (at 69), but it fell back to 50 on Friday and to 45.7 today.

The MACD crossed the signal line giving a further selling signal.

The next support levels are: (1) 5.40 euro: the 200DMA. Can be a strong support as the price was not below this level since the start of June, (2) 5.12 euro is the lower Bollinger band and also a Fibonacci retracement level, (3) 4.93 euro is the local low from 2nd June, (4) 4.58/4.63 euro is a local low from 20 May and a Fibonacci retracement level.

Beside the four auctions to be held this week there will be several events in Brussels ETS participants might find exciting. The chair of the new environment committee of the European Parliament (ENVI) will be elected on Monday afternoon. As the biggest party in the Parliament the European Peoples Party has the right to appoint the chair candidate. After several names emerged, the final candidate is Gianni La Via who voted twice against back-loading in the previous Parliament plenary. The Climate Change Committee will discuss the next carbon leakage list Wednesday afternoon and the second stakeholder consultation about the post-2020 carbon leakage list will be hosted by the European Commission on Thursday.

All in all, it is difficult to find any factor that could reverse the recent decline of the EUA Dec14 at the moment.

Monday, June 30, 2014

EUA Dec14: The increasing trend unhurt, but trading might be range bound

Last Friday’s bullish engulfing helped the EUA Dec14 to appreciate further on Monday. The contract broke the 100DMA and hit an intraday high of 5.85 euro.  Thanks to the strong auction result the price tested the 5.92 level, a local high from 24 April, but failed to break it and fell back to 5.79 euro. The increasing trend that started mid-May remained unhurt. After testing the upside the price fell back to the 100DMA on Wednesday and the EUA Dec14 closed just one cent below the closely followed indicator. The benchmark contract traded in a narrow range of 11 cents on Thursday to close flat day on day. The candle looks like an inverted hammer, indicating that the market is trying to define a bottom. Friday’s close gives reason for some optimism again as buyers late in the afternoon pulled the price higher which closed near its daily high.

The technical picture is still positive. The increasing trend channel that started mid-May is still untouched although the steepness decreased in the last two weeks. Last week the 30DMA also crossed the 200DMA giving an additional signal of bullishness. The 5.93/6.00 euro level however proved a strong resistance in the last three months and without supportive news it might halt further appreciation this week as well. From the downside the moving averages might limit any decline.

Monday, June 23, 2014

EUA Dec14: Higher volumes and volatility expected this week

The gap of last Monday’s open was filled in in the first hours of trading and ceased to work as support. The price therefore fell to 5.65 euro after hitting a six-week high at 5.81 euro. Thanks to the price appreciation on Tuesday afternoon, the daily candle became a bullish engulfing and gave a positive sign for Wednesday’s opening. Also the 20DMA crossed the 200DMA on Tuesday, strengthening the bulls further. The EUA Dec14 hit a new local high at 5.82 euro on Wednesday, but failed to maintain gains. Some market participants interpreted as a negative sign that the price was not able to stay above the 100DMA, but it is more likely that the upper Bollinger band reversed the price appreciation. An impact assessment showed that an ambitious energy efficiency target within the 2030 climate and energy targets would keep the EUA price low for a prolonged time. The price fell further on Thursday, after the assessment leaked, amid low liquidity near the 5.60 euro level that was a strong resistance in the first week of June. 5.55 euro proved a good support on the last two days of the week and turned the price back upwards on Friday. The last candle of the week forms a bullish engulfing with Thursday’s candle, which makes us optimistic for this week. 

This week might be more exciting, volumes and volatility might be higher again as politicians in Brussels will be active. Political groups within the European Parliament are expected to be established. The biggest question is whether there will be a new group of far right / euro-sceptics and how many MEPs will opt for staying independent. (A new group can be formed by 25 MEPs from 7 countries.) 

Opening might be sleepy on Wednesday as access to the Registry will be suspended in the morning. Transactions will be queued, the British Registry informed. The software will be updated by the European Commission to remove account detail from the Trusted Account List.

On the same day the European Commission will hold a discussion with a group of experts about the market stability reserve. 

End of the week will be busy again as the European Council will have a two-days meeting. The two main topics are: the appointment of the candidate for Commission President (a qualified majority is needed) and further discussion of the 2030 climate and energy targets. 

There will be four auctions this week (except on Wednesday) offering a total of 8 million allowances.

The positive mood from Friday's close continued today and the room is open until 5.82 euro (the high from 18th June), followed by the next resistance at 5.92 euro (the high from 24th April).

5.56 euro was a good support on the last two trading days last week and it is also a Fibonacci retracement level.

Monday, June 16, 2014

EUA Dec14: Good technical picture dented by plenty of auction supply and geopolitical tensions

Germany's support for an early introduction of the structural reform of the EU ETS supported the price last week. In addition to bringing forward the implementation of the market stability reserve to 2017 instead of the 2021 suggested by the European Commission, Europe's strongest economy also wants putting the 900 million back-loaded allowances into the reserve.

Although with a low volume due to public holiday in parts of Europe and without breaking last Friday’s high at 5.63, the EUA Dec14 gained 1.6% on Monday which was a positive sign. Tuesday’s candle reminds us a doji, indicating some hesitation. The benchmark contract tried to break last Friday’s high at 5.63 euro on Wednesday, but after the failed test the price fell back below the support level at 5.50. The 200DMA supported the price on Thursday and buyers arriving in the afternoon made the price test the intraday high from the Friday before at 5.63 euro, but the test failed. The price gathered more momentum on Friday and in the first hours of trading it hit a new local high not seen since 25 April.

The technical picture looks promising, the MACD is in the positive territory and the RSI at 61 still leaves some room for further appreciation. The 20DMA crossed the 30DMA on Thursday, providing a positive sign.

The first level to test to the upside is at 5.92/6.00 euro (the high from end of April) while the 200DMA could be a strong support in the case of a correction.

The rally might be decelerated this week as there will be plenty of auction supply. Investors might also get risk-off this week due to the tensions in Ukraine and Iraq. These geopolitical tensions only look supportive for the price at first look, but they can lead to a setback in the economy.

Monday, June 9, 2014

EUA Dec14: Healthy demand pulled the price above the 200DMA

The EUA Dec14 appreciated 7.5% last week. After the moderate volumes and volatility in the last week of May, average daily volumes increased to 17-18 million and the price moved within a wide range of 4.93 and 5.63 euro. 

Despite falling below 5 euro during the day, Monday’s close above the 20DMA was a promising sign. The benchmark contract started Tuesday from the 30DMA and rallied further to close 14 cents above the 200DMA. The price appreciated further on Wednesday and this helped the MACD to climb into positive territory (first time since mid-March), but market participants decided for a profit taking in the afternoon, leaving a doji-like candle in the chart. The price appreciation that started in the first half of the week continued on Thursday and the price hit a daily high at 5.60 euro, a level not seen since 25 April. The benchmark contract climbed further in Friday’s opening, but the auction clearing price that came in lower than the secondary market price pushed the EUA Dec14 below 5.50 euro.

The moving averages will serve as support for the price: 200DMA at 5.36 euro, 30DMA at 5.23 euro and 20DMA at 5.19 euro.

If the rise in the price continues this week, the first resistance will be at 5.92 euro (the high from 24 April), followed by 6 euro (a Fibo level). 

Monday, May 26, 2014

EUA Dec14: Thin volumes expected for this week

The EUA Dec14 fell below the local low at 4.72 euro that proved a good support earlier and hit a new local low at 4.65 euro last Monday. By the end of the day the lower Bollinger band stopped further depreciation and the RSI (33) came also close to oversold territory. 

Last Tuesday started with a new May low at 4.63 euro, but buyers took over the trading floor in the afternoon after the director general of climate action didn't exclude the possibility of an early implementation of the structural reform called market stability reserve. The benchmark contract booked a 3% increase by the end of the day. 

The positive mood survived Wednesday as well and helped the EUA Dec14 breaking the 5 euro level. The 20 DMA, however, stopped the price at 5.23 euro. 

Thursday’s doji candle showed uncertainty of market participants about the chances of further price appreciation. 

The price couldn't hit a new high on Friday, with the daily high of 5.28 euro being 6 cents below Thursday’s high. Other negative sign is that the price fell below the Fibonacci level at 5.12 euro in the morning. Despite opening in a positive mood on Friday, the benchmark contract showed signs of fatigue in the afternoon and closed below the 200 and 30 DMAs. On the positive side, the MACD crossed the signal line again, giving some hope to optimistic market participants.

This week will be characterized by intensive news flow thank to the Carbon Expo starting on Wednesday, but thin volumes due to public holidays across Europe.

If messages from the Carbon Expo are positive, the price has to fight the 20, 30 and 200 DMAs first (at 5.18, 5.30 and 5.32 euro, respectively). The next resistance level can be found then at the local high from 24 April at 5.92 euro.

If the price falls below 5 euro again, the price might retest last week's low of 4.63 euro.

Monday, May 19, 2014

EUA Dec14: Left the range for the downside

Contrary to the week before, last week’s volumes were again at more or less “normal” levels. Monday’s and Thursday’s candles still kept the hope alive that the EUA Dec14 can stay above the 200DMA. For a short time the price broke even the 20DMA hitting a weekly high of 5.45 euro. Wednesday afternoon however sellers took over the trading floor and pushed the price below all moving averages. The 38.2% Fibonacci retracement level kept the EUA Dec14 from falling further and the price closed at 5.16 euro, just one cent above the daily low. Bears collected even more power during night and pushed the price below the Fibonacci level and the psychological level of 5 euro on Thursday. The EUA Dec14 fell to 4.72 euro, a level not seen since the beginning of April.

The MACD turned down deeper into the negative territory and RSI fell to 33, close to oversold territory which starts from 30.

In the lack of buyers the price can test support levels at 4.58 euro (23.6% Fibonacci level), 4.03 euro (local low from end of March) and 3.71 euro (2014 low hit 28th of March). 

Should buyers reappear in the market, the first resistance level to break is near 5 euro. After this the former support level at 5.12 euro waits for the price. 

Monday, May 12, 2014

EUA Dec14: Range bound trading after compliance

Any attempt to provide a technical analysis of last week’s movement might fail for two reasons: the price moved in a narrow range of 5.07 and 5.40 euro and daily average volume fell to the half of April’s average volumes. Monday’s candle actually defined the range for the whole week already and the candles became smaller and smaller by the end of the week. 

If we are looking for signs, then there are more of the negative ones. The 30DMA slipped below the 200DMA on Wednesday and the MACD crossed the signal line on the same day. Tuesday’s and Wednesday’s candles together form a bearish engulfing. The only positive sign is that Friday’s closing price came in slightly above the 200DMA. The RSI is at 47 (neutral).

The closest support levels are: the 38.2% Fibonacci retracement level at 5.12 euro and last week's low of 5.07 euro.

In a positive scenario the price has to combat with the 20DMA first (at 5.42 euro) and with the local high from end of April at 5.92 euro.

Monday, May 5, 2014

EUA Dec14: In the net of moving averages

Last week’s technical picture is difficult to interpret as volumes were not enough to confirm any signal technical indicators gave. 

The first days of the week provided a positive picture as the EUA Dec14 managed to break over the most watched moving averages, but the starting positive trend was annulled later in the week. The benchmark carbon contract closed on Monday on the 200DMA at 5.26 euro and started on Tuesday from the same level to close at 5.46 euro, above all moving averages. A new weekly high was reached on Wednesday at 5.54 euro, but by the end of the day the price returned to Tuesday's closing level. Trading volume was too low on Thursday (due to a public holiday in continental Europe) to give an interpretable sign, although the long-legged doji candle could have been a warning sign about hesitation of the market.

Friday’s close below the 200DMA should be interpreted as a negative sign. The European Commission said that less than expected credits have been exchanged for EUAs than expected which was interpreted by the market that installations would look for more credits in the next 12 months and demand for EUAs would be dented.

Today's open confirmed the negative picture, after the front year German power retested the 34 euro level in the morning hours after reaching 35.25 euro last week.

The MACD is still in the negative territory, but became a straight line in recent days. RSI at 44, neutral.

In a negative scenario, support levels can be found at 5.04, 4.58 and 3.71 euro. To the upside the EUA Dec14 will have a difficult task to break all the moving averages (at 5.28, 5.21 an 5.37 euro).