Monday, September 22, 2014

EUA Dec14: Politics and auction volumes to define the range for this week

The doji candle on 11th September was followed by a bearish engulfing next day. Also the MACD arrived to the negative territory on that Thursday. So it was no major surprise that the EUA Dec14 slipped quickly below 6 euro last week thanks especially to the narrowing clean-dark spread in German power. The 20DMA crossed the 30DMA on Wednesday giving another sell signal. On the same day however the price reached the 200DMA quickly which proved a good support and turned back the benchmark contract to 6 euro. The round number represents a psychological level and a Fibo level as well (taking 2014 high and low).
Since the beginning of September the price formed a declining trend channel the upper end of which was touched, but not broken on Friday.
This week the ENVI will vote about the objection to the 2015-2019 carbon leakage list which in case of adoption could have a bullish effect on the EUA price. The chances however for the objection to pass the plenary are low as the Green Group's votes won't be enough to get absolute majority.
The five auctions on the other hand (offering a total of 10.5 million EUAs) could exercise a pressure on the price and not let it above the 20 and 30DMAs at 6.18 and 6.23 euro, respectively.
There seems to be still a hope for the market stability reserve to come into force, which might keep the price above the 200DMA (at 5.75 euro at the moment) which is the closest relevant support now.



Source: Bloomberg Finance L.P.

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