Monday, November 3, 2014

EUA Dec14: Consolidation after Council conclusions and before ENVI meeting

The positive news about an unanimous agreement in the Council about the 2030 targets pulled the EUA Dec14 to 6.44 euro and the RSI to 67 on 24th October. The price even checke dterritories outside the upper Bollinger band. This made a correction in the first days of last week likely. 

The price fell to 6.27 on Monday and hit a daily low at 6.15 on Tuesday. With latter move the increasing trend channel which started in October seemed broken, but thanks to utility activity the price rallied in the late hours of Wednesday which made us simply widening the trend channel.

Thursday started with breaking the resistance level at 6.44, but the outlook of an agreement between Russia and Ukraine about gas deliveries pushed the price lower in the afternoon and the result was a doji candle indicating hesitation of the traders. 

Friday's black candle seemed to confirm that the price is more likely to stay in its comfort range than breaking to new highs.

We might see further sideways movement in the first half of the week. The relative strength index (RSI) came down to neutral territory (56).

The first support level is at 6.19 euro, the 20DMA. If the price falls below this level, it leaves the increasing trend channel (again). The next support level might be the 30DMA at 6.05 euro followed by the 200DMA at 5.91 euro. In the last two weeks the 50DMA which is now at 6.10 euro proved a good support level.

Wednesday's stakeholder consultation in ENVI about the market stability reserve (MSR) might influence the price in the second half of the week depending on the opinions of the participants. If there seems to be a strong support for the early implementation of the MSR, the benchmark contract might retest the local high reached last week at 6.47 euro and even increase further to the next resistance level at 6.51 euro.

Our base range for the week is 6.19-6.47 euro, while the wider range might extend between 6.05-6.51 euro.

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