Monday, August 3, 2015

EUA Dec15: Season of low auction volumes starts

Despite a relatively good start to the week, the EUA Dec15 slipped lower step by step last Monday. The first disappointment was the auction which—although well bid—cleared 4 cents below the secondary market price. In the afternoon the price moved in a narrow range of 5 cents between 7.98 and 8.03 euro.

From the Friday before until Tuesday, the EUA Dec15 moved in a declining trend channel. The correction happened after an 11% rally in July. The price hit a new weekly low at 7.95 euro (1 cent below a Fibonacci retracement level) on Tuesday. In the afternoon, however, the price tested the upper end of the short term declining trend channel and closed above it.

Wednesday morning the benchmark contract seemed to  return into the declining trend channel, but bulls invaded the trading floor at noon and pulled the price to 8.10 euro, just 5 cents below the 2015 high of 8.15 euro.

The benchmark contract had a neutral start to the day on Thursday, but a weak EUA auction and news in the afternoon about the IMF possibly not participating in a new Greek bailout might have been the trigger sending the price to a new weekly low at 7.85 euro in the afternoon.

Although the price held relatively stable during Friday, the short term technical picture worsened. The candles from Wednesday and Thursday form a bearish engulfing and the MACD crossed the signal curve on Friday to give another bearish sign. A good dark spread, however, kept the price from hitting a new weekly low on Friday.

In five auctions only 7.5 million EUAs will be offered after the 15 million from last week. The declining supply might support the price during the month. 

Average daily volumes might decline as market participants are on holidays and many power plants run maintenance.

Support levels are the 7.85 euro weekly low and the 20 and 30DMAs at 7.80 and 7.70 euro, respectively.

In a positive, scenario (for example well bid auctions) the price might climb back easily above 8 euro the first resistance level being at 8.10 euro (last week’s high) followed by 8.15 euro (2015 high).

Source: Bloomberg L,P.

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