Monday, August 31, 2015

EUA Dec15: Increased auction supply might put a pressure on the price

Despite opening 1 cent higher than the settlement price the Friday before, the EUA Dec15 fell rapidly in the first ten minutes of trading last Monday. The benchmark contract plummeted below the 20DMA (at 8.08 euro) to 8.06 euro in the morning. The 10min RSI fell to 25 and triggered some purchases. As a consequence, the price climbed back to 8.18 euro.

The news on Tuesday about the People’s Bank of China cutting interest rates and reserve ratios helped not only stock markets in recovering, but also the EUA Dec15. The price jumped to 8.29 euro at noon, working off almost half of its losses from the two previous sessions. The price closed just 3  cents below the daily high, but this was enough already to push the MACD below the signal curve.

Stock futures in the red Wednesday morning suggested already that the Chinese measure might be not enough to calm investors. The benchmark carbon contract opened one cent above the settlement price of the previous day and jumped to 8.35 euro in the morning hours, but gave up gains quickly after noon and closed 2% below Tuesday’s settlement price. The candles from Tuesday and Wednesday formed a bearish engulfing, another bearish signal after the MACD crossed the signal curve on Tuesday.

Despite an auction cover ratio of 4.30, a record not seen since 16th June, the depreciation of the benchmark carbon contract continued on Thursday and the price fell to 8.01 euro, a 2.5 weeks low. The EUA Dec15 closed finally at 8.05 euro, below the 20 and 30 DMAs.

The 8.00 euro support level, however, proved a good support and turned back the benchmark contract on Friday. After some initial hesitation the price climbed back above the 30DMA, but was not able to break the 20DMA.

Increased auction volume and continued debate about the reform of the EU ETS might have the major impact on the EUA Dec15 price in September. 

Although the daily auction volumes increase from September, this week starts with a day without any auction due to the summer bank holiday. 

Should optimists get the majority on the trading floor, they have to break the two Fibonacci levels at 8.17 and 8.27 euro before retesting the 2015 high at 8.43 euro.

In a negative scenario, the first support will be the 8.00 euro followed by the 50DMA at 7.88 euro and the August low at 7.76 euro.

Source: Bloomberg L.P.

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