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.