Monday, July 6, 2015

EUA Dec15 relatively stable despite negative news flow

Despite hitting a one-month low on Monday, the EUA Dec15 remained in the 7.18-7.64 euro range it moved in the last two months. This shows its strength, because from the downside the price is well supported by expectations for a positive plenary vote about the MSR next week and for ambitious post-2020 proposals on 15th July. The MACD, however, slipped below the signal curve again, giving a bearish signal.

The price continued its recovery on Tuesday as well and climbed shortly above the 30 and 20DMAs, but was not able to keep the gains and closed just slightly above the 30DMA.

The benchmark contract spent most of Wednesday between the two moving averages and by the end of the day it climbed 4 cents higher than Tuesday’s settlement price.

After two days of appreciation, the EUA Dec15 turned downwards on Thursday as the German coalition decided against the planned coal levy. As a consequence, even outdated coal fired power plants would be able to supply electricity, but only if the demand (and the price) reached a critical level. The German front year power lost 0.6% in Thursday’s opening and the EUA Dec15 fell 4 cents from Wednesday’s settlement level.

The EUA Dec15 opened at 7,43 euro on Friday and appreciated the whole day long, but closed just flat compared to Thursday’s settlement. The volume was lower than generally on Fridays, because the banking holiday in the US and the European heatwave kept many traders away from their desks.

All in all, the EUA Dec15 held relatively stable despite the negative news flow last week (Greek default, closing of German lignite plants). The price might have been supported by expectations for an approval of the MSR by the plenary of the European Parliament this week and for ambitious reform proposals from the European Commission next week.

If market gets disappointed the price could fall back to the local low at 7.18 euro from May or even to the 200DMA at 7.04 euro.

In a positive scenario, the price has to break the 20DMA at 7.51 euro first before retesting the local June and May highs at 7.64 and 7.75 euro, respectively.

Source: Bloomberg L.P.

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