Monday, December 8, 2014

EUA Dec14: Increasing trend channel broken

The new German Climate Action Plan and the lack of directional signals from last week's ENVI and ITRE meetings pulled the EUA Dec14 out of the increasing trend channel.

The EUA Dec14 closed the first trading day of the last week with a gain of 3 cent, but it visited the levels below 7 euro during the day after the MACD crossed the signal curve on the Friday before. The report of the International Energy Agency (IEA), however, helped the price in recovering.

On Tuesday, before two key meetings traders opted for closing  long positions and after hitting a daily high at 7.13 euro, the price fell below the 20DMA at 6.91 euro. Thanks to this move the price fell from the increasing trend channel.

On short term (on the 1h chart) the price became oversold, so we expected a correction on Wednesday and exactly this happened. During most of the day the price was captured by the 20 and 30DMAs, a short test of climbing above the 20DMA failed after the German government accepted the new Climate Action Plan which has the aim to reduce CO2 emissions by almost 80 million tonnes by 2020.

The 20 and 30DMAs defined the price movement on Thursday, but on Friday the 30DMA was broken given another bearish sign that the price could fall to 6.50 euro.

The first support level is near 6.50 euro with 6.55 being a Fibonacci retracement level, 6.53 a local low and 6.49 the 50DMA. Carbon options expire this Wednesday on ICE. If sellers of call options with a strike price of 7 euro or higher decide to cash in, there might be a selling pressure on the price.

Any upside might be limited by the 30 and 20DMAs at 6.79 and 6.92 euro, respectively.

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