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).

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