Monday, April 27, 2015

EUA Dec15: More than 6% jump supported by German climate contribution plan and compliance buyers

A controversial German plan about coal fed power plants, dark spread above 4/MWh and compliance buying pulled up the EUA Dec15 price by 6.40% w/w above 7 euro.
Despite a weak open the EUA Dec15 jumped 28 cents from its daily low of 6.84 euro to 7.12 euro on Monday, breaking the 20DMA at 7.00 euro and a Fibonacci retracement level at 7.05 euro. The sudden jump helped the MACD crossing the signal line and climbing into positive territory. 

The appreciation stopped on Tuesday, when the price moved in a  narrow range of 11 cents and was not able to hit a new local high, but closed down by 5 cents. There might have been some profit taking after the rally on Monday. 

Wednesday’s candle is almost a doji suggesting hesitation of traders, but bulls returned to the market on Thursday, when the price hit a new two-month high at 7.31 euro. With breaking the resistance level at March high of 7.29 euro the price got into a vacuum until 7.52 euro, a Fibonacci retracement level. The contract filled then this vacuum until 7.40 on Friday.

The RSI was lifted to 62 which still leaves some room for further appreciation. Resistance levels are at 7.52 euro (a Fibonacci level) and at 7.90 euro (2015 high). As the technical picture looks positive at the moment, there is a chance that the benchmark contract appreciates further in the first days of the week. Especially, as compliance buyers and some traders speculating on the COREPER meeting on Tuesday might provide a support to the price. 

In the second half of the week we might see some profit taking as the support of compliance buyers vanishes and traders might close positions ahead of a long weekend in many EU countries. 

Source: Bloomberg Finance L.P.

Monday, April 20, 2015

EUA Dec15: Moving sideways in a 20 cents range

Last week was rather boring in the EUA market. The negative effect of the weak German dark spread was offset by small compliance buyers which resulted in low volumes (from Wednesday on daily volumes remained well below 10 million in the benchmark contract) and sideways movement. The price moved in a range of 20 cents between 6.76 and 7.00 euro.

The EUA Dec15 opened at 7.00 euro last Monday, 2 cents higher than the closing price the Friday before. The price then slid continuously to hit a daily low at 6.81 euro three times. The contract fell more than 2% on Monday and closed below the 30DMA at 6.91 euro. 

The price continued its downward path Tuesday morning and fell to just one cent above the 6.75 euro daily low from 31 March, but closed unchanged at 6.84 euro. At the same time the MACD slipped below the zero line. The support level at 6.75 euro, however, stopped the further depreciation for the week.

The EUA Dec15 didn’t hit any new local lows on Wednesday, but the 20 and 30DMAs stopped it from further appreciation as well. The 30DMA was finally broken on Thursday when the price hit an intraday high of 6.97 euro. 

The price is moving between the 200 and 20DMAs, maybe closer to the upper edge of the range. It is positive, that daily lows were higher day by day and daily highs were slightly increasing, although Friday spoiled the momentum. 

It might be slightly supportive for the price that this week's auction volume is some 3 million less than last week. On the other hand, there are still plenty of allowances to be distributed by member states to both industrials and power companies (2015 free allocation and 2014 derogation).

Several technical meetings will take place this week in Brussels, where the MSR might be discussed as well. This might increase the news flow about the reform of the EU ETS and the volatility of the EUA price. Depending on the comments and proposals, the first strong support to break is the 200DMA at 6.76 euro, while to the upside it's the 20DMA at 7.00 euro.

 Source: Bloomberg Finance L.P.

Monday, April 13, 2015

The EUA Dec15 fell from the short term increasing trend channel

After the Easter holidays, the EUA Dec15 had a weak start to the week. The benchmark contract traded in a narrow range of 6.89 and 7.26 euro defined by the candle from 1st April for six days.

As there were no new headlines about the MSR, the carbon market followed mainly the energy mix. The German front year power lost 0.4% last week, but the corresponding dark spread had a more dramatic fall of 8% as the coal appreciated in parallel with the strengthening of the US dollar.

7.09 euro proved a good support for the EUA Dec15 as it was tested twice on Tuesday and on Wednesday, but the more it got tested, the weaker it became.

This support level broke then on Thursday when the price touched a daily low at 7.04 euro. The depreciation continued on Friday when the price fell below 7 euro and didn’t climb back above this level by the end of the day, but closed at the mid-Bollinger band at 6.98 euro.

The MACD reversed its direction and turned back south, but it is still above the zero line. This, however, weakens the buy signal given by the 20DMA last Thursday when it crossed the 30DMA. The price fell from the short term increasing trend channel last Thursday. 

At the same time, the CER had a spectacular rally. There might be installations swapping EUAs for CERs or simply buying the cheaper credits for compliance purposes.

Although there is a possibility that politicians share their opinion about the MSR in the coming days/weeks, the next round of trilogue negotiations is scheduled for the 5th March, after the compliance deadline.

This makes us suppose that the balance of supply and demand of allowances might have a bigger impact on the EUA price in the coming 10-12 days. It might be worth mentioning that installations are still waiting for a total of 297 million EUAs: 193 million from the 2015 free allocation (which they could "borrow" for 2014 compliance) and 104 million from derogation (five entitled countries didn't distribute the allowances yet). If all these allowances land in the market in the next less than three weeks, this additional supply might have a negative impact on the EUA price.

Should the price fall further, support levels can be found at 6.92 (30DMA), 6.90 (Fibo), 6.75 (local low from 31st March), 6.70 (200DMA).

Should positive comments from politicians help the price recovering or should the member states not be able to distribute the missing allowances, resistance levels could be retested at 6.98 (20DMA), 7.05 (Fibo), 7.29 (local high from 23rd March), 7.50 (Fibo).

 Source: Bloomberg Finance L.P.

Tuesday, April 7, 2015

Less than expected fall in 2014 VE pulled the EUA Dec15 up 4% w/w

The EUA Dec15 appreciated by 1.8% last Monday, although the volume of 7 million allowances was less than half of the volume of the weakest day of the week before. The 30DMA at 7.00 euro provided the first strong resistance the price had to break. From the downside the price was well supported by the 20DMA at 6.84 euro.

The EUA Dec15  fighting with the 30DMA on Wednesday morning as well. Volumes and intraday ranges were significantly below last week’s levels. 2014 verified emissions, however fell by 4.9% only, significantly less than the median expectation of analysts of 5.5%. As a consequence, the benchmark contract jumped to 7.26 euro, finally breaking the 30DMA. 

The price cimbed one cent higher to 6.27 euro Thursday in the morning, reaching levels above all the moving averages. The MACD reached the positive territory as well. 

The short term technical picture looks good with the MACD above zero and the 20DMA being close to cross the 30DMA. 

Looking at the price from a wider perspective, however, the benchmark contract moves in a range of 40 cents between 6.80 and 7.20 euro.

We expect a short and calm week with the price possibly moving in sideways above the 30DMA, currently at 6.95 euro.

Although there are no official meetings scheduled for discussing the MSR, we have to watch out for rogue comments or leaks from officials, MEPs or ministers which might flip the price one way or another out from the range mentioned above. 

Source: Bloomberg Finance L.P.