Monday, November 24, 2014

EUA Dec14: Setting comfort zone before key events

Last week started with retesting the 20DMA after the report of the MSR rapporteur Ivo Belet contained a starting date of 2021 disappointing those market participants who hoped for an early implementation. By the end of the day, however, the EUA Dec14 managed to hit a new 8-month high. 

A new local high was reached on the following two days as well pulling the relative strength index (RSI) close to overbought territory. Other factor suggesting a correction was the bearish engulfing which was formed on Wednesday and Thursday.

The contract felt comfortable in the 6.86-7.08 range last week. The increasing trend channel is still intact, but if the price tests the 20DMA at 6.71 euro, the trend might be broken. A Fibonacci retracement level is also near here reinforcing the importance of this level.

The upper Bollinger band (now 7.13 euro) worked as a good resistance last week and could limit gains to the upside this week as well. This is followed by local highs at 7.13 and 7.33 euro, before the 2014 high at 7.41 euro is reached.

The deadline for MEPs in the ITRE committee of the European Parliament expires today at noon time. The content of the amendments might make the EUA Dec14 retesting some support or resistance levels. 

The second half of this week might see low volumes as part of the market will be in London at an annual conference of energy traders. Other part of the market might simply take the last two days of due to the celebration of Thanksgiving and the start of Black Friday in the US. On days like these volumes might be low, but if trading books dry out, it could be easier to cause bigger volatility in the market.

Next week will be busy again with Germany deciding about the closure of some hard coal and lignite-fired power plants which might and the ENVI and ITRE discussing the market stability reserve. 



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