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).