Monday, May 18, 2015

EUA Dec15: Quiet week ahead

After the initial sideways movement the EUA Dec15 started climbing higher to hit 7.67 euro last Monday. The benchmark contract continued its appreciation on Tuesday and reached 7.74 euro, 1 cent below the 2015 May high.

The positive decision of the COREPER meeting on Wednesday about the MSR didn’t bring any new highs. Some traders might have decided to take the profit from earlier long positions which resulted in the benchmark contract falling back to 7.52 euro during the day to recover before the market closed and finish the day at 7.68 euro.

Thursday’s trading was characterized by extremely low volumes as German and French traders stayed away from their desks due to a public holiday (Ascension Day). The EUA Dec15 moved in a narrow range of 8 cents between 7.70 and 7.62 euro in most of Thursday’s trading. In the last 20 minutes, however, the support level was broken and the price fell to 7.58 euro accompanied by one third of the daily volume.

Thursday’s candle together with Wednesday’s candle form a bearish engulfing, although the low volume weakens the signal of this technical formation.

In the first two weeks of May the EUA Dec15 moved in a range between 7.41 and 7.75 euro which might be the range of this week as well, as the political agenda is empty, but abundant supply is secured from five auctions of  a total of 12 million EUAs to be held on EEX.

Thanks to the MSR negotiations it moved closer to the upper range and the relative strength index approached the 70 level which suggests that some correction might be in the cards. The distance between the MACD and the signal curve is decreasing, and when the former crosses the latter, it might be the sign of the start of a correction period.

The first support level can be found at last week's low at 7.50 euro, followed by the 20DMA at 7.47 euro and the 30DMA at 7.31 euro. The short term increasing trend that started mid-March would be broken if the price fell below the 30DMA.

In a positive scenario last week's high at 7.74 would be the first resistance level to test, before the price could try to break the 2015 high at 7.90 euro.

 Source: Bloomberg Finance L.P.

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