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.