Monday, August 17, 2015

EUA Dec15: Price became overbought after hitting a new 2015 high

The EUA Dec15 moved on a roller-coaster last Monday. Some traders might have thought that after four black candles there would be time for a correction, and the first trade settled at 7.92 euro, 13 cents higher than the settlement price the previous Friday. The price, however plummeted below the 30DMA after the first trade in front year German power happened, as this benchmark hit a new record low. Recovering German electricity prices, news about a heatwave in CEE, a strong action result (and the outlook of record low volume to be auctioned during the week) combined with an outlook for a Greek deal with creditors helped the EUA Dec15 in recovering and climbing even above its opening price. The price hit an intraday high at 7.96 euro and closed above the 20 DMA, at 7.93 euro.

After a bullish close on Monday the benchmark contract expanded its gains by more than 1% on Tuesday and climbed above 8 euro for the first time in a week.

Thanks to a strong auction result and a rally in the EUR/USD the EUA Dec15 was lifted to a new 2.5 year high at 8.23 euro on Wednesday and to another at 8.26 euro on Thursday.

Friday’s candle looked like a (bearish) shooting star in the morning, but the buyers invaded the trading floor at noon time to lift the benchmark contract to a new 2.5 year high at 8.36 euro. By this move the price filled a gap from 2012 and broke another resistance level.

Although the auctioned volume increases by 1.5 million this week, it remains below the weekly volumes in July and September. This low volume might support the EUA price this week. 

Technical indicators and the five white candles, however, suggest that the price became overbought on Friday (with the RSI at 71). In the case of a correction, the first strong support level is around 8.00 euro with the 20DMA (at 8.02 euro) and a Marubozu line waiting there.

Source: Bloomberg L.P.

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