Monday, January 27, 2014

EUA Dec14: ENVI vote on Thursday will be crucial

Last Monday started in a negative tone in the carbon market and the EUA Dec14 price tested the 30DMA at 4.91 euro. The retest happened on Tuesday again, but by the end of the day the benchmark contract closed in the positive territory. 
Thursday’s and Friday’s candles show a bullish engulfing giving more hope for those believing in back-loading. The 20 and 30DMA closed at the same level at 4.93 on Friday. If the price advances further, the 20DMA will cross the 30DMA from below which would be another bullish sign. 
There is still room for further appreciation based on the RSI as well being at 68. The MACD found comfort in the positive territory.
In the case of a correction the support levels are at 5.16, 5.00 and 4.93 euro. The closest resistance level is at the high from 16 October, at 5.62 euro. This resistance level is followed by 6.06 euro (a high from 18 September 2013).
Before political decisions we often see some kind of speculation on the outcome coupled with a profit taking after the decision. The result of the decision (as expected or not) defines the extent of the correction. Something similar might happen this week as well. The ENVI committee of the European Parliament will vote about objections to back-loading on Thursday. If the objections do not get enough support, rapporteur Groote might seek for shortening the scrutiny period in the Parliament. The market expects the ENVI committee to block the objections. Even Mrs Korhola who supports the objection confessed her scepticism about the objection to pass the ENVI.
Market opened in a positive mood today and this was reinforced by a strong auction that settled at highest price in four months (5.34 euro).

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