Monday, September 29, 2014

EUA Dec14: Short-term declining trend channel couldn't be broken

The warning signals from the third week of September (the 20DMA crossing the 30DMA and the bearish engulfing of the Friday-Monday candles) proved to be correct. The EUA Dec14 fell below the 200DMA on Tuesday and hit a 3-month low at 5.63 euro after the new rapporteur of the market stability reserve proposal Ivo Belet published the preliminary timeline of the approval process. According to the current plans the ENVI would first vote about the reserve in February 2015.  The date seemed to be later than market participants expected and traders sent the price down sharply. The more than 5% decline was followed by a correction on Wednesday, but gains were capped at 5.82 euro. 
The Director General for Climate Action Jos Delbeke said later during the week he believed the market stability reserve could be law by June-July 2015.  This statement and the outlook of less allowances to be auctioned this week (no UK auction on Wednesday and Friday's German auction has been cancelled due to a national holiday) helped the price in recovering on the last days of the week. 
From the first days of September a short-term declining trend channel forms in the chart. The depreciation accelerated last week and the price fell below the lower Bollinger band. The RSI  touched 32 last week suggesting that there is a chance for a correction. This however does not necessarily mean the reversal of the trend. To break out of the channel the price has to reach 5.95 euro at least and stay above this level which didn't happen until now.
After Friday's appreciation the MACD moved closer to the signal curve, but it wasn't able to cross it and remained in the negative territory. The RSI is in neutral territory (at 42). 
Traders disappointed by the lengthy procedure of the market stability reserve and potential negative comments by the ENVI and ITRE committees about the Climate Action and Energy commissioner designate Miguel Arias Canete might push the price down to the 200DMA at 5.77 euro again. If the moving averages cannot stop the fall, the next support level is last week's low at 5.63 euro. 
The reduced auction volume of this week however might provide support to test the upside. Resistance levels can be found at 6.03 euro (the 20DMA), 6.07 euro (last week's high) and 6.15 euro (30DMA).




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