Monday, January 5, 2015

EUA Dec15: Holiday hangover

Helped by falling coal prices, last Monday’s first trades closed near the local high hit on 24th December at 7.57 euro, but the  EUA Dec15 returned below the upper Bollinger band in the afternoon and closed at 7.34 euro. The low hit on Monday at 7.23 euro proved a good support for the rest of the week.

After having been tested three times, the support was broken on Friday when the benchmark contract fell with a dramatic move to the 23.6% Fibonacci retracement level at 7.08 euro. Despite some intra-day recovery the EUA Dec14 closed just one cent above the daily low. The MACD crossed the signal curve last Friday.

In the absence of political news the carbon market was mainly influenced by the prices in the energy market where the German front year power fell to an all time low.

Taking last October’s and December’s lows as the two points of an increasing trend line, the trend is still not broken. In addition last week’s move was not supported by a significant volume which makes any statement of technical analysis less reliable. In order to break the trend line the price would have to fall to approximately 6.90 euro, but at this level the RSI (now at 47) would reach the oversold territory, so the price might pick up again.

Normal life is expected to return to the markets this week as traders are beck to their desks after a long holiday. EUA auctions resume on Wednesday. The increased supply might have a negative impact on the market price.

At the moment the strongest support level is around 7.06 euro. We can find moving averages, a Fibonacci retacement level and local lows here. The next support might be the 6.90 euro level mentioned above, followed by 6.56 euro (a Fibonacci retracement level and a local low from December).

To the upside the price has to combat the resistance levels at 7.38 and 7.57 euro.

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