Monday, June 8, 2015

EUA Dec15: Lack of political news leaves benchmark contract without direction

The EUA Dec15 edged down in early trading session last Monday mainly influenced by a narrowing clean dark spread. Prices recovered slightly after strong auction results, but still remained in negative territory throughout the rest the day. The bellwether contract closed the session at 7.28 euro, down 0.08 euro from the previous close. 

Hopes for a solution of the Greek debt situation provided momentum to the euro and the German power prices on Tuesday. The benchmark carbon contract moved in tandem and was lifted above the 20 and 30DMAs at 7.45 and 7.43 euro, respectively. The intraday range widened from 0.14 euro on Monday to 0.24 euro. As a consequence, the MACD climbed back into positive territory again.

Although less vehemently, but the appreciation continued on Wednesday. The EUA Dec15 hit a 2-week high at 7.58 euro and remained above the moving averages which at the same time changed their respective positions. The 20DMA crossed the 30DMA from above, providing the first bearish signal of the week.

This was followed by Thursday’s black candle which together with Wednesday’s white one forms a bearish engulfing. Despite the lack of an EUA auction (due to a public holiday in Germany) the EUA Dec15 closed below the 20 and 30DMAs.

Friday’s doji candle shows some hesitation of traders about the future direction of the price.

Despite the nice rally on Tuesday and Wednesday the price was not able to climb back into the short term increasing trend channel.

Due to the factors mentioned above the technical picture looks fragile. In addition, auction volume this week increases by 6 million compared to last week. Our range for this week is therefore between 7.19 euro (a Fibonacci retracement level) and 7.59 euro (last week’s high).

After the first impact assessment about the post-2020 review of the EU ETS Directive which has been rejected by the impact assessment board we expect the European Commission to work on a new version and leave the market without direction until it's finished.

The Relative Strength Index (RSI) being in neutral territory (at 53) suggest further sideways movement.

Source: Bloomberg L.P.

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