Monday, September 14, 2015

EUA Dec15 broke out from the short term declining trend channel

The EUA Dec15 moved without any direction on Monday. Despite falling to 8.02 euro in the morning and after a weaker than expected auction result, the price recovered and closed at 8.09 euro, 1 cent below the settlement price the Friday before.

News about the restart of some coal fired power plants on Tuesday helped the benchmark carbon contract in climbing higher. The movement accelerated after a strong auction which cleared in line with the secondary market price (auctions generally clear at a certain discount compared to the secondary market price).

The EUA Dec15 jumped to the 20DMA at 8.18 euro on Tuesday afternoon. This was also the upper edge of the short term declining trend channel. Breaking this level improved the technical picture and opened the room for retesting earlier highs at 8.35 and 8.43 euro.

The appreciation might have happened too fast in a very short time (the intraday RSI reached 78 in the afternoon) which resulted in a correction Wednesday morning, but bulls took over the trading floor again after the EUAA auction and pulled the price to 8.30 euro, a level not seen since 26th August.

The benchmark carbon contract didn’t delay the retest and jumped to 8.35 euro level on Thursday, 
but after four white candles the EUA Dec15 took a break on Friday and didn’t climb higher than the weekly high. Although Thursday’s and Friday’s candles form a bearish engulfing, which might be a warning signal for this week's bulls, the price remained above the short term trend channel and the 20DMA.

With all financial markets and investors focusing on the rate decision of the US Federal Reserve on Thursday, we might see prices stabilizing at current levels and moving sideways in the first half of this week. 

Volatility might increase on Friday, when markets have the possibility to react on the US news and the MSR is expected to receive its final rubber stamp from the European Council.

Last week's break out from the short term declining trend channel bodes well for retesting the 2015 high at 8.43 euro, but in a negative scenario the moving averages could serve as good support levels (20DMA at 8.20 euro, 30DMA at 8.14 euro and 50DMA at 8.00 euro).

Source: Bloomberg L.P.

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