Monday, October 27, 2014

EUA Dec14: Consolidation likely after recent rally

Despite some negative signs, the EUA Dec14 hit a 7-week high last Friday at 6.44 euro. First there was the bearish engulfing from the 17th of October followed by a doji candle on Tuesday indicating uncertainty of traders about where the price might head. On the other hand, the 20DMA crossed the 30DMA on the same day giving a bullish signal. The 6.27 level was tested three times before it got broken on Thursday. From now it should work as a support level and the first test happened already on Friday when the benchmark hit a daily low at 6.28 euro.

The MACD climbed higher in the positive territory, but the RSI at 67 is a warning signal that despite the supportive factors (like the looming discussions about the MSR which will be a new opportunity to trade on) the price might consolidate at current levels for the time being.

Based on technical analysis the EUA Dec14 is in an increasing trend especially after receiving a positive impetus from the Council conclusions last week. The next resistance level is at 6.51 euro, but the relative strength index is close to the overbought territory which makes some consolidation more likely for the next couple of days. Speculation on the MSR negotiations starting in November might take off in the second half of the week.

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).