Monday, December 28, 2015

EUA Dec16: Quiet week expected

After a weak start, the EUA Dec16 started to rally Monday noon. The contract closed 13 cents (+1.6%) above the settlement price of the Friday before. The rally accelerated in the afternoon when the German front year power climbed into positive territory and the euro appreciated 0.4% versus the US dollar.

The force remained with carbon on Tuesday as well. The price jumped to 8.36 euro in the morning hours to move sideways in a 2 cents range in the afternoon amid thin liquidity. The bellwether contract closed the session at 8.32 euro, some 0.06 euro higher compared to the previous close. A total of 6.1 million allowances changed hands on ICE in the benchmark contract of which 900,000 where block trades. The price was approaching the 100DMA at 8.37 euro and the 20DMA at 8.41 euro, but didn’t reach them.

The dark side took over the trading floor on Wednesday, when less than 4 million allowances traded and the EUA Dec16 declined 5 cents in a daily comparison. Despite hitting a new local high at 8.38 euro in the morning, the price was not able to maintain its gains. The benchmark closed 3 cents below Tuesday’s settlement price.

The price moved in a narrow range of 11 cents between 8.21 and 8.32 euro on Thursday. The traded volume of less than 2 million allowances suggested that most of the market participants were busy with decorating the Christmas tree instead of trading carbon.

With the holiday season continuing this week as well, the price might consolidate around current levels. Our base range of 8.00-8.40 euro might seems wider than usual, but the volatility might increase in a thin market when it’s easy to swing the price even with a small volume. The MACD is in the negative territory, but seems to be crossing the signal curve, which would be a positive sign. 

The RSI at 43 is in neutral territory.

Support levels are seen at the 200DMA (7.95 euro), the lower Bollinger band (8.01 euro) and a Fibonacci level at 8.20 euro.

There is a strong resistance building at 8.40 euro with the 20 and 100DMAs waiting there. This level is followed by a Fibonacci level at 8.55 euro.



Source: Bloomberg L.P.

Monday, December 21, 2015

EUA Dec16: MACD slipped into negative territory

Despite falling to a new two-month low after the weak auction result, the EUA Dec16 rebounded Monday afternoon. The RSI, however, remained below the crucial 30 level, suggesting a potential bullish reversal. In addition, the price was still below the lower Bollinger band at 8.32 euro.

After some initial hesitation the EUA Dec16 climbed higher in Tuesday’s trading and finished 1.5% above Monday’s settlement price. The price closed above the Fibonacci level at 8.25 euro, but below the next Fibonacci level at 8.34 euro and the 100DMA at 8.36 euro. Despite the appreciation, the price was just slightly above the lower Bollinger band

After a relatively calm day, investors started to exit positions in the last 40 minutes of trading on Wednesday. Nobody wanted to caught in a position before the rate decision of the US Federal Reserve which was expected to increase the volatility in the EUR/USD and through the FX also in commodity prices and by the end of the day in the price of EUA.  As a consequence, the 20DMA crossed the 30DMA providing a bearish signal.

Thursday morning the EUA Dec16 reacted with declines on the Fed decision as the stronger dollar pushed the dark spread lower. The last auction of the year, however, brought buyers to the market. The benchmark contract reversed its direction and jumped to a daily high at 8.24 euro. The happiness about the strong auction though vanished by the end of the trading.

The benchmark contract moved in an intraday range f 18 cents on Friday and remained under pressure. Brent falling to new record low pushed other commodities down as well. The price fell to the lower Bollinger band at 8.05 euro first and recovered by the end of the day to close just one cent below the settlement price from the Friday before.

The technical picture looks gloomy with the MACD in the negative territory and the 200DMA luring the price to 7.92 euro. The RSI at 33 points, however, suggests that the price is close to oversold territory and might climb higher. Should the lack of auctions support the price, the 100DMA at 8.37 euro might stand in the way of appreciation.



Source: Bloomberg L. P.

Monday, December 14, 2015

EUA price fell below the 2015 increasing trend line

After a weak start the EUA Dec15 was falling continuously last Monday and lost 1.3%. It not only fell below the 50DMA, a long time support, but fell and closed below last Thursday’s low at 8.42, confirming the short term bearish trend that started 25 November.

Despite a positive start the EUA Dec15 fell to a new 3-week low Tuesday. Traders were especially disappointed by the auction that cleared 7 cents below the secondary market price and had a very low cover ratio. By the end of the day, however, the benchmark contract recovered and closed at Monday’s settlement price.

The EUA price ended relatively unchanged Wednesday as the market followed the German power price lower initially and then back up toward the end of the day. With the German power opening lower and pushing the dark spread into red, the EUA Dec15 fell sharply in the morning and hit a daily low at 8.29 euro, just one cent above the November low at 8.28 euro.

After three days of new daily lows hit, Thursday could be no exception. The price couldn’t even reach Wednesday's closing level.

The Armageddon came on Friday, when the price broke all important support levels, including the 2015 increasing trend channel and the psychologically important 8.00 level. The price lost 3.5% in a daily comparison.

The relative strength index fell below 30, increasing the likelihood of a correction this week. The correction might be supported by the success of the international negotiations in Paris and the vanishing EUA auctions.

Should the global sell-off, however, continue and the price fall below 8 euro again, the price might find its first support from at Friday’s low or at the 200DMA. As the carbon was not the only asset sold off last week (the price of Brent fell by 12%, the German DAX index lost 4% last week) we tend to think that the weak performance of the EUA contract was the result of a global sell-off before the rate setting meeting of the US Federal Reserve this week. Until the decision of the American central bankers this Wednesday, markets (also carbon) might remain under pressure.

The last trading day of the EUA Dec15 contract is 14 December (today). After this day the EUA Dec16 contract becomes the new benchmark. The EUA Dec16 settled 7 cents above the EUA Dec15 last Friday and its 200DMA is at 7.89 euro.


Source: Bloomberg L.P.

Monday, December 7, 2015

EUA Dec15 step dancing on the 50DMA

Last Monday’s doji candle showed hesitation of the market which direction to take. The 8.50 euro seemed to be a good support level with two Fibonacci levels at 8.55 and 8.50 euro, the 30DMA at 8.53 euro and the 20DMA at 8.51 euro. There were, however, some warning signals. In addition to the 30/20DMA cross and the tweezer top from the week before, the MACD fell below the signal curve and the price traded outside the short term increasing trend channel, giving another bearish sign.

The EUA Dec15 formed another doji candle on Tuesday confirming the uncertainty of market participants.

Wednesday until noon time the EUA Dec15 moved in a narrow range of 4 cents. The support at 8.50 euro proved strong again, but sellers took over the trading floor (in all markets, actually) and pushed the price to 8.47 euro, two cents below Tuesday’s low. By the end of the day the price was not able to climb back higher and closed just one cent above the daily low.

The benchmark carbon contract rebounded from Wednesday’s losses Thursday on the back of a stronger euro making burning coal more profitable for power plants. The carbon price started the day with a downward move hitting an intraday low at 8.42 euro (the 50DMA exactly) before trickling up. The bellwether contract closed the session at 8.59 euro, up 0.11 cents or more than 1% from the previous close. Thursday’s candlestick in combination with Wednesday’s candle formed a ’bullish engulfing pattern’, providing some hope for the bulls.

Despite early optimism on Friday, the price closed 0.8% below Thursday’s settlement price. The depreciation accelerated especially in the final minutes of trading leaving no doubt that the Thursday rally was a one-off that left the price in the short term declining trend channel that started 25 November.

The first support for the declining EUA Dec15 price is the 50DMA at 8.44 euro. This moving average halted the price from falling since September, but has been tested several times recently and the theory of technical analysis says, the more a level gets tested the weaker it becomes. Below this level the November low at 8.28 euro is the next support.

Should declining auction volumes support the price (this is the last week with a complete auction calendar), it has to break above 8.50 euro first to be able to retest the 2015 high at 8.71 euro. All in all, we are more bearish for this week as the chart doesn’t show any sign of a turn.



Source: Bloomberg L.P.

Monday, November 30, 2015

EUA Dec15: At the edge of the trend channel

The EUA Dec15 contract closed higher Monday, as falling coal prices caused clean dark spreads to widen. Volume was reasonably high with 15.1 million, compared to a 30-day average of 12.8 million. The technical signals were contradictory. Bloomberg's trendstall indicator forecast falling prices, but the two last candles formed a bullish harami.

The price broke the resistance level at 8.64 euro easily on Tuesday. The upward move was accompanied by a strong trading volume. There was, however, one warning signal: thanks to the mainly sideways movement in the last six days, the 20DMA became flat and the 30DMA reached it from below.

The benchmark carbon contract took a dip on Wednesday, after the UK auctioned 3.1 million allowances at a clearing price below market and a bid-to-cover ratio of 2.01. However, the price recovered in the afternoon, following German power prices and finished the session at 8.63 euro, just 0.03 euro lower compared to Tuesday’s close. The traded volume remained below the monthly average possibly also reflecting markets preparing for the holidays.

Since mid-November the price moves in a range between 8.47 and 8.67 euro and Thursday was no exception. The low volumes because of the US Thanksgiving holiday increased the volatility of the price, but it didn’t leave the range mentioned. The hanging man formation from Wednesday and the 30DMA crossing the 20DMA provided slightly bearish signals. As a consequence, the EUA Dec15 was not able to hit a new local high. Disappointed traders sold off the benchmark carbon contract in the last hour of trading. The price tried to climb higher on Friday, but it could only reach Thursday’s opening at 8.60 euro.

The lower edge of the increasing trend channel halted the depreciation of the price and there is a chance that the price turns back higher towards the upper edge of the channel. 

There will be only four auctions this week with an auction volume of less than 12 million. In addition, the disappearing auction supply in the second half of December might support the price this week already.

The first resistance level is last week’s high at 8.67 euro, followed by the 2015 high at 8.71 euro. 

The 20DMA crossing the 30DMA and the candles from last week, however, warn traders about possible losses. Should the euro weaken further versus the US dollar, the dark spread would worsen and utilities would find less incentives to burn coal. The European Central Bank holds a rate setting meeting on Thursday. Although the market does not expect any changes in the current rate of 0.05%, the recent comment of the central bank officials increase the likelihood of further monetary easing. Should the ECB announce new tools, the first effect might be the weakening of the euro.

To the downside the first support is around 8.50 euro, followed by the 50DMA at 8.38 euro. 


Source: Bloomberg L.P.

Monday, November 23, 2015

EUA Dec15: Breaking cautiously from the declining trend channel

The benchmark carbon contract broke from the short term declining trend channel that started on the last day of October last Monday. The fall on Friday and the flat MACD, however, increase the uncertainty if the recent gains can be maintained.

Despite some hesitation in the morning, the EUA Dec15 jumped to 8.50 euro on the first day of the week. The appreciation was helped by the German front year power opening almost 1% higher and a strong auction that cleared at a 2 cents premium to the secondary market price. The price hit a weekly high at 8.54 euro before closing and gained 1.7% compared to the settlement the Friday before.

The rally continued Tuesday when markets shrugged off risk aversion from the terror attacks in Paris and markets rallied around the world (with the German DAX index gaining more than 2% and the front year German power hitting 29 EUR/MWh again). The EUA Dec15 climbed to a Fibonacci level at 8.61 euro and kept gains by the end of the day.

After two days rallying the price could still hit a new 3-week high at 8.64 euro on Wednesday, but it was not able to keep its gains and fell to the 20DMA.

The pause was followed by another day of smaller gains on Thursday, although the volume was the lowest in two weeks. The price climbed back to the weekly high at 8.64 euro, but was not able to break above this level.

Traders took profit on Friday, when the price lost 1.4% compared to Thursday’s settlement. The 20DMA at 8.52 euro could not halt losses, just the 30DMA at 8.49 euro was able to do so.

Despite the sell-off on Friday, the short-, mid and long-term increasing trends are still unhurt. The MACD crossing the signal curve last week is another reason to be optimistic. In a positive scenario, there are not many resistance levels before the price could retest the 2015 high at 8.71 euro. The sell-off on Friday, however, is a warning signal. Should the German power return into its declining trend and the euro weaken further, the price could fall to the first support level at 8.50 euro (with two Fibonacci levels and two moving averages near there). In a negative scenario, the price could retest the 50DMA at 8.34 euro that stopped the price twice in October and in November.



Source: Bloomberg L.P.

Monday, November 16, 2015

Pressured by lower German power prices and dark spread, the EUA Dec15 fell to a 3-week low last Monday. The price continued its decline Tuesday morning as well, and hit a new 4-week low  at 8.28 euro. At this point, however, there were many supports: the 50DMA, a Fibonacci level and the lower edge of the declining trend channel. In addition, the German front year power price turned higher (for the first time in five days) and the European 2016 coal price fell to a record low. All these factors helped the benchmark carbon contract in gaining 1.4% on Tuesday and in climbing back above the next Fibonacci level and the 30DMA at 8.39 euro. The price closed at 8.44 euro.

The appreciation accelerated Wednesday morning, when the price reached the next Fibonacci level at 8.51 euro. The weak auction result and falling German power prices, however, changed the direction of the benchmark carbon contract which fell to an intraday low at 8.37 euro and closed unchanged compared to Tuesday’s settlement price.

The German front year power price falling to a new record low exercised a pressure on the EUA Dec15 on Thursday. The price fell to a daily low at 8.32 euro, but the 50DMA at 8.30 euro limited further losses. Despite being on a roller-coaster the whole day long, the EUA Dec15 remained in the usual ranges: in the November declining trend channel and between the 50 and 20DMAs.

The ranges mentioned above kept the price on Friday as well. The EUA Dec15 moved in a narrow range of 8 cents during the day.

The price was not able to break out from the declining trend channel last week and it might remain under pressure this week as well due to the abundant supply of allowances, a weak energy mix and a general risk-off mood in the markets after the terror attacks in Paris last Friday.

The base range for this week could be between the 50 and 20DMAs, at 8.31 euro and 8.49 euro, respectively. Should the price break out of this range, the next resistance is the 2015 high at 8.71 euro. The closest support to the 50DMA is a Fibonacci level at 8.19 euro.





Source: Bloomberg L.P. 

Monday, November 9, 2015

EUA Dec15: ECJ opinion might increase volatility this week

After a week opening in the German front year power, the EUA Dec15 fell to 8.52 euro Monday morning. Recovering power prices kept the EUA price stable during the rest of the day. The bullish trend since end September, however, was broken and with a Hanging man’ candlestick, the technical picture has turned bearish for carbon.

After falling from the short term increasing trend channel that started on 29th September, it didn't take long for the EUA Dec15 to break the Fibonacci level at 8.51 euro on Tuesday. The benchmark contract dropped to the 20DMA at 8.45 euro at noon time and extended losses later to 8.39 euro, a Fibonacci level.

Despite the lack of a UK auction on Wednesday, the fall of the EUA Dec15 seemed unstoppable. The benchmark contract fell to 8.36 euro in the afternoon when the front year German power slipped into the negative territory and the EUR/USD hit a new 3-month low.

Although the technical picture looked bearish, the benchmark carbon contract took a break on Thursday and moved in a narrow range of 10 cents between 8.38 and 8.48 euro.

The price opened around Thursday’s closing level on Friday, but the weak German EUA auction result pushed it lower before noon time. The benchmark contract received another hit in the afternoon, when better than expected US employment data pushed the EUR/USD to a 6-month low. The price fell briefly below to a 3-week low at 8.35 euro, and closed just 6 cents higher, at 8.41 euro.

In the lack of further news about the reform of the EU ETS, the EUA Dec15 takes direction from the energy mix where both the German power and the corresponding dark spread perform weak. This week the decision of the European Court of Justice about the legality of the cross sectoral correction factor might increase the volatility in the carbon. The opinion is expected to be published on Thursday.

Should the negative sentiment prevail (auction volumes increase by 3 million in a weekly comparison and weak performance of the German front year power and the dark spread), there is a strong support around 8.30 euro with several technical indicators meeting near there (a Fibonacci level at 8.39 euro, the 30DMA at 8.37 euro, a Fibonacci level at 8.29 euro, the 50DMA at 8.28 euro). Below these levels a Fibonacci level at 8.19 euro and local lows near 8.07 euro could halt the depreciation.

Key resistance levels are near 8.50 euro (the 20DMA at 8.49 euro and a Fibonacci level at 8.51 euro) before the price could retest the 2015 high at 8.71 euro.



Source: Bloomberg L.P.

Monday, November 2, 2015

EUA Dec15: German power prices might provide direction to the price this week

After the rally on the Friday before the EUA Dec15 took a break on Monday. The middle point of Friday's candle at 8.55 euro served as a good support level during the day. The meeting of the EU environment ministers failed to provide any direction to the price, but bulls woke up in the last hour of trading and pulled the price to a new three year high at 8.67 euro.

After hitting a new three year high at 8.70 euro in the morning (and lifting the RSI to 71), the benchmark carbon contract retreated to test the same Marubozu line at 8.55 once again on Tuesday after the front year German power slipped into red and the euro lost its gains versus the USD.

Monday’s and Tuesday’s candles together formed a bearish engulfing which defined the mood in Wednesday’s opening. During the session the EUA Dec15 continued to correct from the three year high reached earlier during the week. Up to now the upwards pointing support line, intact since 29 September, was not broken.

The price moved in a narrow range of 9 cents in the first half of Thursday. The Marubozu line at 8.55 euro worked as a good support again. The price started appreciating in the afternoon in tandem with the front year German power (+1.5% d/d) and the corresponding dark spread (+8.8% d/d) and hit a new three year high at 8.71 euro.

The price, however, couldn’t reach a new high on Friday and fell below below the Marubozu line this morning. Other warning signal is that the price also fell from the increasing trend channel that started on 29th September.

The benchmark carbon contract showed a surprisingly high correlation with the German front year base load power price recently. As market does not expect any major announcements about the EU ETS reform in the coming weeks, the correlation might continue in November as well. Since the German power price hit a record low at 28.58 EUR/MWh on 22nd October, it jumped by almost 4% and got close to the psychologically important 30 EUR/MWh level. It remains to be seen if the price of German front year power is able to maintain its momentum in the next days.

The low volumes in the EUA Dec15 on the last two days of the last week might be a sign that the benchmark carbon contract was near to overbought territory, and might be an indication that some consolidation is due. At the same time the relative strength index (RSI) of the front year German power price reached 61, a level last seen in July.

In the case of a correction, the first support level is the Marubozu line at 8.55 euro. This is followed by the Fibonacci level at 8.51 euro, the 20DMA at 8.44 euro and the 30DMA at 8.32 euro. 

Should the rally continue, the resistance levels are now the 2015 high at 8.71 euro, the upper Bollinger band at 8.76 euro and the lower edge of the gap from 2012 at 8.85 euro.


Source: Bloomberg L.P.

Monday, October 26, 2015

EUA Dec15: Is the sky the limit?

The EUA Dec15 traded in a narrow range of 11 cents last Monday and closed 0.5% below the settlement price of the Friday before. 8.30 euro, a daily low several times in the second week of October proved a good support level.

Thanks to the afternoon rally, the EUA Dec15 jumped to 8.48 euro on Tuesday, and closed just one cent below the intraday high, the highest close since November 2012. Thanks to the rally, the 20DMA crossed the 30DMA from below, which might be considered as a positive sign. In addition, Tuesday’s and Monday’s candles formed a bullish engulfing. No surprise that the price retested the 3 year high at 8.51 euro Wednesday morning. Thanks to the European 2016 coal price plummeting to a new record low and the lack of the UK auction, the price reached 8.54 euro during the day. In the afternoon, however, it was not able to maintain its gains and closed the day at the intraday low of 8.45 euro.

The price took a break on Thursday and moved in a 6 cents range between 8.42 and 8.48 euro most of the day. This consolidation seemed to prepare the rally Friday when the price hit a new three year high at 8.63 euro and even managed to close at this level.

The huge white candle could make traders more optimistic about the continuation of the increasing trend, but the relative strength index at 69 warns of overbought prices which might result in consolidation around 8.50 euro or profit taking. The weekly auction volume increases by 3 million, which might limit the upside potential this week.

Support levels are at 8.55 euro (the middle line of Friday’s candle), 8.45 and 8.34 euro (Fibonacci lines) and the 20 and 30DMAs at 8.28 and 8.23 euro, respectively.



Source: Bloomberg L.P.

On the other hand, environment ministers will discuss the post-2020 reforms of the EU ETS Directive for the post-2020 period. If the meeting has positive messages for the market (ambitious reductions in the free allocation, perspective of a quick agreement among member states), this could potentially boost the price further. To the upside the sky is the limit, as the price fell from 10 euro to the current levels quite quickly in 2012. Psychologically the round figures could be considered as resistance levels (9.00 euro, 9.50 euro).



Source: Bloomberg L.P.




Monday, October 19, 2015

EUA Dec15 hit new three year high at 8.51 euro

After the EUA Dec15 reached the 2015 high at 8.43 euro Monday morning, traders decided to take profit and the price closed 5 cents below last Friday’s settlement.

The EUA Dec15 consolidated in a 6 cents range on Tuesday. The technical picture was neutral at the moment. The 2015 high at 8.43 euro has been tested once on Monday. With every new test, however, the level became weaker and weaker.

With a spectacular rally Wednesday afternoon the EUA Dec15 broke out from the narrow range it traded on Tuesday and in the first half of Wednesday and hit a new 3-year high at 8.47 euro.
The EUA Dec15 extended Wednesday’s gains on Thursday and hit a new 3-year record at 8.51 euro. After three days of rising prices, however, the benchmark contract ran out of the Bollinger bands which made a correction likely in the afternoon. After the recent rally, some traders might have opted for profit taking which pushed the price lower on Thursday and on Friday. All in all, the EUA Dec15 gained 0.5% last week.

The RSI remained in the neutral territory during the whole week, but came close to the overbought territory when the price hit the new record. At the same time, the upper Bollinger band at 8.48 euro limited further gains.

The negative trend in the German power and European gas prices exercises a pressure on the EUA price. The first strong support level is at 8.30 euro (closing price from last Monday and daily low from Tuesday and Wednesday). The next support level is around 8.18 euro, where several moving averages (20, 30, 50DMAs) meet.

The price might receive support from ADP negotiations in Bonn, falling coal prices and the lower auction supply this week. Should the price be able to expand gains, the former 2015 high at 8.43 euro is the first resistance, followed by the new record at 8.51 euro. Above this level two local lows from 2012 form resistance levels at 8.58 and 8.64 euro.

Last week we saw the EUA price reacting actively on changes in the EUR/USD. he European Central Bank will have a rate setting meeting this Thursday. Although no change in the current rate of 0.05% is expected, but during the press conference after the meeting the President of the Bank might hint on planned measures to boost the European economy which might move the FX pair and the carbon at the same time.




Source: Bloomberg L.P.

Monday, October 12, 2015

EUA Dec15: Friday rally lifted the price above the declining trend channel

Despite the weak opening in the first minute of trading when the EUA Dec15 fell to a 3-day low at 8.06 euro, the benchmark carbon contract rallied to 8.24 euro last Monday, almost reaching the weekly high from the week before at 8.25 euro. The intraday rally lifted the MACD above the signal curve and the zero line. The price came close to break the slowly declining trend channel that started after the 2015 high was reached in August. The candle from Monday and that from the Friday before formed a bullish engulfing making the outlook brighter.

After having retested the support levels formed by the 20 and 30DMAs, the EUA Dec15 kept gains and closed 1 cent higher on Tuesday. The price was still at the upper edge of the declining trend channel.

Despite hitting a 3-week high at 8.27 euro during the day, the EUA Dec15 got under pressure Wednesday afternoon. When it reached the 20 and 30DMAs at 8.13 euro, the decline got faster and the price fell to a daily low at 8.06 euro. Interestingly this was the intraday low from Monday as well which means that there might be a support level here halting the price from further losses. At 8.05 euro we can find a Marubozu line as well.

On a boring day, the EUA Dec15 moved in a narrow range of 4 cents on Thursday and closed marginally higher than on Wednesday.

Friday, however, saw a nice rally after the German auction cleared several cents above the secondary market price. The price broke from the declining trend channel and might have kicked out many short positions which resulted in another rally in the afternoon. Also those market participants who were waiting for to be able to purchase the allowances below 8.00 euro might have executed some "panic purchases".

As for this week, the outlook is somewhat rosier after the break-out from the declining trend channel. The first resistance level to be tested will be Friday's high at 8.38 euro. If the price breaks this level, the 2015 high at 8.43 euro could be retested. After this resistance the space is open for further gains, but the 8.50 euro level might halt the rally. The RSI at 60 now allows for further gains.

On the other hand, it might be worth mentioning that after a short-lived rally in the first half of last week, the 30DMA halted gains in the front year German power which turned back south again. The pattern is similar in the European 2016 gas price as well. These, combined with the weekly auction volume, which will be some 3 million higher than last week, might exercise a pressure on the price of the benchmark carbon contract this week. 

To the downside, the moving averages around 8.15 euro form the strongest support levels. Below that 8.06 euro stopped the price twice last week and is also a Fibonacci level. 



Source: Bloomberg L.P.


Monday, October 5, 2015

EUA Dec15: Record low coal prices and window dressing supported the price last week

Thanks to the German front year power hitting a new record low, the EUA Dec15 fell to a new six week low at 7.90 euro on Monday. At this level it was stopped by the lower Bollinger band.

Thanks to a negative opening in the German front year power, the benchmark carbon market slipped to 7.87 euro early on Tuesday to recover after the auction. After three days of falling prices we saw a correction in the EUA Dec15 Tuesday afternoon (+0.8% d/d) supported by slightly higher power prices in Western Europe.

The EUA Dec15 rallied 2.1% on Wednesday and closed above the 50, 30 and 20DMAs, which is a positive sign. The price opened above the support levels and jumped to 8.23 euro, a 9-day high. The MACD turned to the north, but still remained below the signal curve and the zero line. Wednesday was the last day of the month and also of the quarter which in financial markets is often accompanied by a phenomenon called "window dressing" meaning that holders of long positions would like to see higher prices of their assets.

The relative strength index, however, remained in the neutral territory. The question was if the price would be strong enough to break out from the mid-term declining trend channel that built up since the 2015 high hit in August.

Although it jumped to an intraday high at 8.25 euro on Thursday, the EUA Dec15 was not able to maintain gains and closed the day at 8.17 euro, just 2 cents higher than Wednesday’s settlement. Thursday’s candle with a long upper shadow and a small body without a lower shadow is called a "shooting star" and generally indicates some bearishness in the market.

Should this signal be correct, the losses might be limited by the moving averages. The 20DMA is at 8.14 euro, the 30DMA at 8.13 euro and the 50DMA at 8.11 euro. Below the moving averages we can find a Marubozu line at 8.05 euro (from last Wednesday's candle). Bears might receive some motivation from overall declining power prices and the lack of any political announcements regarding the reform of the EU ETS in the post-2020 period.

On the other hand, the 20DMA climbed above the 30DMA which is generally a bullish sign. This is complemented by the MACD which just climbed above the signal curve and the zero line this morning when jumping front year German power prices helped the EUA Dec15 in climbing higher as well.

Should the rally from end of September continue (for example due a rebound in the German front year power price or the reduced auction volume this week), the price has to break last Thursday’s high at 8.25 euro first before it could retest the September high at 8.35 euro. Although the long term increasing trend channel remained unhurt, the price is moving in a slightly declining trend channel since the 2015 high hit in August. Should the price of the benchmark carbon contract jump above 8.25 euro, it would also mean that it left this declining trend channel.




Source: Bloomberg L.P.

Monday, September 28, 2015

EUA Dec15 under pressure

The negative trend in the German front year power and the weakening of the euro versus the US dollar put a pressure on the EUA Dec15 last week. In addition, the rapporteur of the post-2020 EU ETS reforms Ian Duncan saying that his report on the draft won't be ready before the second quarter of 2016, increased fears about prolonged uncertainty in the carbon market and had an additional negative effect on the carbon price.

Continuing the negative mood from the Friday before the EUA Dec15 opened last week with a one cent gap down. The price fell to a daily low of 8.06 euro, but recovered after a strong auction result. The weakening of the euro, however, pushed the price to a 2-week low at 7.98 euro in the last hour of trading. The lower Bollinger band stopped further depreciation here.

The lower Bollinger band halted further declines in the EUA Dec15 and the price consolidated above 8 euro on Tuesday. The benchmark contract consolidated above 8.00 euro supported by the European coal prices falling to a record low. The price, however, traded in a very narrow range of 7 cents.

Helped by higher German power prices and a strong dark spread, the EUA Dec15 climbed higher on Wednesday and gained 5 cents (+0.6% d/d). Although it climbed above the 50DMA during the day it was not able to close above this level. At the same time the MACD slipped below the zero line, providing another bearish signal. The 50DMA at 8.10 euro halted further gains Thursday morning as well.

With a significant volume, but low intraday volatility the EUA Dec15 fell to 8.01 euro on Thursday (-0.9% d/d). While the price was moving sideways, the bearish signals were convening. 

  • The MACD slipped below the zero line.
  • The 20DMA is below the 30DMA. 
  • There is a bearish engulfing from Thursday/Friday before and 
  • last Thursday’s candle also seems to have formed a bearish engulfing with Wednesday’s candle.

With a strong dollar pushing the German dark spread below 3 euro, the EUA Dec15 hit a new 3 week low at 7.96 euro on Friday.

The EUA Dec15 moved mainly sideways around 8.00 euro last week. In the lack of any development regarding the post-2020 EU ETS reforms and the German front year power in a declining trend, the benchmark carbon contract might slip further. 

We can find support levels at 7.94 (lower Bollinger band and a Marubozu line), at 7.92 (a Fibonacci level) and at 7.76 euro (August low).

In the case of a correction the price has to break the moving averages first (50DMA at 8.10, 20DMA at 8.14 and 30DMA at 8.16 euro) to be able to retest former highs.





Source: Bloomberg L.P.


Monday, September 21, 2015

EUA Dec15: Bearish signals might make traders cautious

With most of the market participants waiting for the rate decision of the US Federal Reserve, the carbon market moved in a very narrow range of 7 cents on Monday. Daily traded volume of less than 4 million also reflected that many traders opted for staying at the side lines of the market. All in all, the benchmark contract closed 3 cents lower than last Friday, confirming the signal the bearish engulfing from previous week gave. In addition, the MACD slipped below the signal curve, adding bearish sentiment.

Falling German and Polish power prices, worse than expected German ZEW figures and a weak auction result pushed the benchmark carbon contract below the 20DMA on Tuesday. The price closed 6 cents or 0.7% below Monday’s settlement price.

Wednesday started in a positive mood after the appointment of Ian Duncan as rapporteur for the post-2020 EU ETS reforms and the front year German power climbing slightly higher. The strong auction result and a surprising rally in oil prices in the afternoon pulled the price to 8.27 euro. The settlement price of 8.24 euro was 0.7% higher than on Tuesday.

Thanks to the three black candles (days with declining prices), however, the 30DMA approached the 20DMA and reached it on Thursday morning, to provide another bearish sign for the next days.

Thursday was one of the most boring days in the life of the EUA Dec15 with all market participants staying at the side-lines of the market before the rate decision of the Fed. The price moved in a narrow 8 cents range in the morning, but was totally flat in the afternoon.

Despite the adoption of the MSR by the EU Council on Friday, the EUA Dec15 was rather weak pressured by a sell-off in Europe (the German DAX index fell below the critical 10,000 points) after the Fed decision.

There are several bearish signals in the chart right now. 
  • There is a bearish engulfing from the 10th and 11th of August. 
  • MACD fell below the signal curve last Monday and
  • the 30DMA climbed above the 20DMA. 

Source: Bloomberg L.P.


Should there bearish signs prove corrects, the price will have to fight with the 50DMA first, at 8.08 euro. (This is happening this morning.) The next support level is the psychologically important 8.00 euro level and after that a local low at 7.95 euro and the August low at 7.76 euro.

One should, however, keep in mind that discussions about the reform of the EU ETS Directive after 2020 in the working group on the environment of the European Council will continue this week, which might provide a positive momentum to the price. In a positive scenario, the 30 and 20DMAs have to be retested at 8.19 and 8.17 euro, before climbing back to last week’s high at 8.29 euro.




Monday, September 14, 2015

EUA Dec15 broke out from the short term declining trend channel

The EUA Dec15 moved without any direction on Monday. Despite falling to 8.02 euro in the morning and after a weaker than expected auction result, the price recovered and closed at 8.09 euro, 1 cent below the settlement price the Friday before.

News about the restart of some coal fired power plants on Tuesday helped the benchmark carbon contract in climbing higher. The movement accelerated after a strong auction which cleared in line with the secondary market price (auctions generally clear at a certain discount compared to the secondary market price).

The EUA Dec15 jumped to the 20DMA at 8.18 euro on Tuesday afternoon. This was also the upper edge of the short term declining trend channel. Breaking this level improved the technical picture and opened the room for retesting earlier highs at 8.35 and 8.43 euro.

The appreciation might have happened too fast in a very short time (the intraday RSI reached 78 in the afternoon) which resulted in a correction Wednesday morning, but bulls took over the trading floor again after the EUAA auction and pulled the price to 8.30 euro, a level not seen since 26th August.

The benchmark carbon contract didn’t delay the retest and jumped to 8.35 euro level on Thursday, 
but after four white candles the EUA Dec15 took a break on Friday and didn’t climb higher than the weekly high. Although Thursday’s and Friday’s candles form a bearish engulfing, which might be a warning signal for this week's bulls, the price remained above the short term trend channel and the 20DMA.

With all financial markets and investors focusing on the rate decision of the US Federal Reserve on Thursday, we might see prices stabilizing at current levels and moving sideways in the first half of this week. 

Volatility might increase on Friday, when markets have the possibility to react on the US news and the MSR is expected to receive its final rubber stamp from the European Council.

Last week's break out from the short term declining trend channel bodes well for retesting the 2015 high at 8.43 euro, but in a negative scenario the moving averages could serve as good support levels (20DMA at 8.20 euro, 30DMA at 8.14 euro and 50DMA at 8.00 euro).







Source: Bloomberg L.P.

Monday, September 7, 2015

EUA Dec15: What could help the price break out from the declining trend channel?

Despite retesting the 20DMA last Monday, the EUA Dec15 was not able to maintain its gains and closed at 8.08 euro, 4 cents or 0.5% lower than Friday’s closing price. Although there were some bearish signals (the bearish engulfing from the week before and the MACD), the 8.00 euro level proved a good support.

After a false break out Tuesday morning, the EUA Dec15 fell below 8 euro after the announcement of the auction which cleared below at 7.98 euro, the lowest price since 11th August. The price recovered in the afternoon and closed at 8.02 euro, but still below the 20 and 30DMAs.

Despite the bearish technical signals, the benchmark carbon contract climbed higher and broke the 30DMA on Wednesday. The 20DMA at 8.15 euro was tested, but not broken.

The EUA Dec15 started Thursday with retesting the 20DMA at 8.15 euro, but after a weak auction which cleared some 6 cents below the secondary market price, it was not able to maintain its gains and fell to 8.05 euro at noon. Buyers, however invaded the trading floor in the afternoon pulling the price to 8.20 euro, a new weekly high. By hitting an intra-day high at 8.23 euro, the price reached the upper edge of the short term declining trend channel.

This upper edge of this declining trend channel limited further gains on Friday as well and reversed the price direction in the morning.

It has to be seen, if this week’s negotiations about the review of the EU ETS Directive would be able to compensate for the negative investor mood in the financial markets which led to a short-term declining trend channel on the chart of the EUA Dec15.

In order to break out from the short term declining trend channel, the price has to jump above the 20DMA at 8.18 euro. 

Should the price remain in the channel, the first support will be the 8.00 euro level which is not only psychologically important, but also close to a Fibonacci line at 8.02 euro. Should the price slip below 8.00 euro, last week's low at 7.95 euro and the 50DMA at 7.94 euro could be tested.




Source: Bloomberg L.P.

Monday, August 31, 2015

EUA Dec15: Increased auction supply might put a pressure on the price

Despite opening 1 cent higher than the settlement price the Friday before, the EUA Dec15 fell rapidly in the first ten minutes of trading last Monday. The benchmark contract plummeted below the 20DMA (at 8.08 euro) to 8.06 euro in the morning. The 10min RSI fell to 25 and triggered some purchases. As a consequence, the price climbed back to 8.18 euro.

The news on Tuesday about the People’s Bank of China cutting interest rates and reserve ratios helped not only stock markets in recovering, but also the EUA Dec15. The price jumped to 8.29 euro at noon, working off almost half of its losses from the two previous sessions. The price closed just 3  cents below the daily high, but this was enough already to push the MACD below the signal curve.

Stock futures in the red Wednesday morning suggested already that the Chinese measure might be not enough to calm investors. The benchmark carbon contract opened one cent above the settlement price of the previous day and jumped to 8.35 euro in the morning hours, but gave up gains quickly after noon and closed 2% below Tuesday’s settlement price. The candles from Tuesday and Wednesday formed a bearish engulfing, another bearish signal after the MACD crossed the signal curve on Tuesday.

Despite an auction cover ratio of 4.30, a record not seen since 16th June, the depreciation of the benchmark carbon contract continued on Thursday and the price fell to 8.01 euro, a 2.5 weeks low. The EUA Dec15 closed finally at 8.05 euro, below the 20 and 30 DMAs.

The 8.00 euro support level, however, proved a good support and turned back the benchmark contract on Friday. After some initial hesitation the price climbed back above the 30DMA, but was not able to break the 20DMA.

Increased auction volume and continued debate about the reform of the EU ETS might have the major impact on the EUA Dec15 price in September. 

Although the daily auction volumes increase from September, this week starts with a day without any auction due to the summer bank holiday. 

Should optimists get the majority on the trading floor, they have to break the two Fibonacci levels at 8.17 and 8.27 euro before retesting the 2015 high at 8.43 euro.

In a negative scenario, the first support will be the 8.00 euro followed by the 50DMA at 7.88 euro and the August low at 7.76 euro.





Source: Bloomberg L.P.


Wednesday, August 26, 2015

EUA Dec15: Will the support level stop it from falling further?

The lack of an EUA auction and the front year German power opening above 30 EUR/MWh helped the EUA Dec15 in opening in the positive territory and in climbing as high as to 8.35 euro (a former 2015 high), but bears invaded the trading floor in the afternoon. 

They pushed the price of the benchmark carbon contract lower by almost 2% to an intraday low at 8.10 euro where the 20DMA and a Fibonacci retracement level built a support level.

Should market be surprised by today's move? 

European stock futures in the red suggested in the morning already that market is sceptical about the measures taken by the Chinese central bank to be enough to boost the economy. The euro lost its power against the US dollar and the German front year power slipped also lower pushing the German dark spread down by 3% d/d.

If we add to these factors, that there are only three days left with a reduced auction volume, we shouldn't be surprised that the MACD crossed the signal curve from above giving a sell signal.

The benchmark contract appreciated almost 3% since the end of July and more than 10% since the end of 2014.

Should the market opt for profit taking and break the 8.10 euro level, the next support is near 8.05 euro (the 30DMA and the intraday low from Monday). The increasing trend channel which started in March would be, however, valid even if the price fell to the 50DMA at 7.84 euro.



Source: Bloomberg L.P.

Monday, August 24, 2015

EUA Dec15: Last week of low auction volumes

After the rally the week before, last Monday’s black candle suggested that there might be a correction this week coming with the EUA Dec15 closing at 8.25 euro, 8 cents lower than the Friday before.

Tuesday’s doji candle, however, showed hesitation of traders. As the reduced auction volume supported the prices of the benchmark contract, it settled 3 cents higher than the day before.

With a spectacular rally after the announcement of the UK auction result on Wednesday, the EUA Dec15 reached 8.38 euro, a level not seen for two years.

Bulls dominated the trading floor on Thursday as well, when the price jumped to a new 2015 high at 8.43 euro. The gains, however, could not be maintained. The technical indicators suggested that the price became overbought and a sell-off on international markets started on worries the Chinese economy would slow down more dramatically than previously thought.

Despite the good auction result on Friday, the EUA Dec15 didn’t climb any higher. With the German front year power falling to a record low the carbon fell to a new weekly low at 8.13 euro and settled 2% lower on the last day of the week.

Although the relative strength index is in neutral territory after Friday‘s losses, other indicators forecast a correction the last week already. The chances for the correction are increasing also as the period of low auction volumes comes to an end soon and traders might purchase the allowances less actively.

Should the (global) negative sentiment push the price lower, the first support level is the 20DMA at 8.08 euro, followed by the 30DMA at 8.02 euro. The August low at 7.76 euro is the next support level after that.

The strongest resistance at the moment is the 2015 high reached last Thursday at 8.43 euro.




Source: Bloomberg L.P.

Monday, August 17, 2015

EUA Dec15: Price became overbought after hitting a new 2015 high

The EUA Dec15 moved on a roller-coaster last Monday. Some traders might have thought that after four black candles there would be time for a correction, and the first trade settled at 7.92 euro, 13 cents higher than the settlement price the previous Friday. The price, however plummeted below the 30DMA after the first trade in front year German power happened, as this benchmark hit a new record low. Recovering German electricity prices, news about a heatwave in CEE, a strong action result (and the outlook of record low volume to be auctioned during the week) combined with an outlook for a Greek deal with creditors helped the EUA Dec15 in recovering and climbing even above its opening price. The price hit an intraday high at 7.96 euro and closed above the 20 DMA, at 7.93 euro.

After a bullish close on Monday the benchmark contract expanded its gains by more than 1% on Tuesday and climbed above 8 euro for the first time in a week.

Thanks to a strong auction result and a rally in the EUR/USD the EUA Dec15 was lifted to a new 2.5 year high at 8.23 euro on Wednesday and to another at 8.26 euro on Thursday.

Friday’s candle looked like a (bearish) shooting star in the morning, but the buyers invaded the trading floor at noon time to lift the benchmark contract to a new 2.5 year high at 8.36 euro. By this move the price filled a gap from 2012 and broke another resistance level.

Although the auctioned volume increases by 1.5 million this week, it remains below the weekly volumes in July and September. This low volume might support the EUA price this week. 

Technical indicators and the five white candles, however, suggest that the price became overbought on Friday (with the RSI at 71). In the case of a correction, the first strong support level is around 8.00 euro with the 20DMA (at 8.02 euro) and a Marubozu line waiting there.


Source: Bloomberg L.P.



Monday, August 10, 2015

EUA Dec15: Low auction volume failed to support the price

After falling 2.4% on the last two days of the previous week, the EUA Dec15 had a positive start to last week and gained 1% in Monday’s trading. Tuesday’s opening was also strong, mainly helped by higher German power prices. The EUA Dec15 climbed briefly above 8.00 euro. The chart contains, however, two warning signals making traders more cautious about buying carbon: the MACD crossed the signal curve on 31st July and the candles from the 29th and 30th July formed a bearish engulfing.

As the bearish signals seemed to kick in, the EUA Dec15 was not able to maintain gains and closed at its daily low at 7.91 euro on Tuesday, 4 cents lower than Monday’s closing price.

In a very thin trading, the EUA Dec15 tested the support level at 7.85 euro several times on Wednesday. As a consequence, the support got weaker and weaker, until it broke in the last minutes of trading. Traded volume was low during the whole day, and increased only when the support level was broken as there might have been stop-loss orders near that level. The benchmark contract closed below the 20DMA at 7.89 euro.

Intraday ranges were shrinking day by day. After Tuesday’s 10 cents, Wednesday’s 8 cents and Thursday’s 5 cents, the EUA Dec15 moved in  a band on 2 cents in the first hour of Friday’s trading. 
The range only widened after the price fell below the support level at 7.80 euro. Daily traded volumes also reflected summer lull.

All in all, although the long term increasing trend channel remained unhurt, the short term trend goes downwards. The former local high at 7.64 euro is the first support level, followed by 7.50 euro.

After four black candles from the last week, however, we might see some correction this week. Resistance levels are at the 30 and 20DMAs at 7.77 and 7.90 euro, respectively before retesting the 8.00 euro level.






Source: Bloomberg L.P.