Monday, October 6, 2014

EUA Dec14: Friday's rally promising, but downward trend unhurt

The first candle of last week formed a new bearish engulfing with that from the Friday before. Despite opening near 6 euro, the price ended the trading on the 200DMA. On Tuesday and on Wednesday the benchmark closed above the moving average, but on Thursday the price fell sharply and ended below the 200DMA. The downward momentum remained valid on Friday morning as well. The price started the day with sharp losses and came close to the local low from the 7th of July (reaching a daily low at 5.48 euro) to recover later, shortly before the market closed.

The declining trend however remained untouched. The price almost reached the lower end of the channel on Friday and also the RSI came close to 30 suggesting that a correction might be in the cards, but a trend reversal cannot be seen at the moment. 

This week more 10.5 million EUAs will be offered via auctions, almost the double of last week's volume. This abundant supply might exercise a negative impact on the price.

No major announcements are expected from the policy side either meaning a missing support for the price.

Next year delivery coal fell to an almost 5-year low recently which should in theory support the carbon price, but the strengthening of the US dollar versus the euro (and other currencies) stops traders to buy the heavily polluting commodity.

As a consequence sideways movement is the most likely scenario for this week within the range of 5.45 and 5.79 euro. In order to break the declining trend channel the price should reach levels above 5.79 euro (the 200DMA). 

Support levels are at 5.12 (Fibo), 5.45 (local low from 7th July), 5.48 (last week's low), 5.56 (Fibo).
Resistance levels are at 5.79 (200DMA), 5.89 (20DMA), 6.04 (30DMA).

The MACD is in the negative territory and below the signal line. RSI is close to the oversold territory (39). 

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