Monday, March 9, 2015

The EUA Dec15 hit a new 2015 low. More to come?

Despite a brief correction on the Friday before, the downward movement - which started after the ENVI vote on 24th February - continued last Monday and the two candles together formed a bearish engulfing. 

The 100DMA held the EUA Dec15 on Monday, but the price opened below this level on the next day and didn’t climb back above, making it a good resistance for the future. The MACD slipped below the zero line on Tuesday. 

The European Commission published its first status table of the 2015 free allocation Tuesday evening showing that 63% of the total has been distributed already. The price hit a new 2015 low at 6.66 euro on Wednesday morning falling briefly below the lower Bollinger band at 6.69 euro, but recovered during the day and closed above 7 euro. The price was supported by optimistic comments about the MSR from an official from DG Clima and German economy minister Gabriel. 

The two candles from Tuesday and Wednesday formed a bullish engulfing which resulted a false signal in Thursday’s sell-off when the price fell from 7.08 euro in the opening to 6.80 euro by the end of the day. The first reading of the Latvian presidency's proposal regarding the MSR was negative not only because it contains a 2019 start date, but mainly because the draft doesn't contain any indication about the future of unallocated allowances.

Seems like March will be  a busy month with a split Council to come up with a consensus about the MSR, free allocation to continues and verified emissions to be published. Although we realize the strong support for the reform of the EU ETS, at the moment seems to us that all these factors might exercise a downward pressure on the price.

A test of the 200DMA at 6.56 euro (and a new 2015 low) might by in the cards, as the RSI didn’t reach the oversold territory yet, but then a correction is expected which could lift the price above 7 euro again.

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