Monday, September 7, 2015

EUA Dec15: What could help the price break out from the declining trend channel?

Despite retesting the 20DMA last Monday, the EUA Dec15 was not able to maintain its gains and closed at 8.08 euro, 4 cents or 0.5% lower than Friday’s closing price. Although there were some bearish signals (the bearish engulfing from the week before and the MACD), the 8.00 euro level proved a good support.

After a false break out Tuesday morning, the EUA Dec15 fell below 8 euro after the announcement of the auction which cleared below at 7.98 euro, the lowest price since 11th August. The price recovered in the afternoon and closed at 8.02 euro, but still below the 20 and 30DMAs.

Despite the bearish technical signals, the benchmark carbon contract climbed higher and broke the 30DMA on Wednesday. The 20DMA at 8.15 euro was tested, but not broken.

The EUA Dec15 started Thursday with retesting the 20DMA at 8.15 euro, but after a weak auction which cleared some 6 cents below the secondary market price, it was not able to maintain its gains and fell to 8.05 euro at noon. Buyers, however invaded the trading floor in the afternoon pulling the price to 8.20 euro, a new weekly high. By hitting an intra-day high at 8.23 euro, the price reached the upper edge of the short term declining trend channel.

This upper edge of this declining trend channel limited further gains on Friday as well and reversed the price direction in the morning.

It has to be seen, if this week’s negotiations about the review of the EU ETS Directive would be able to compensate for the negative investor mood in the financial markets which led to a short-term declining trend channel on the chart of the EUA Dec15.

In order to break out from the short term declining trend channel, the price has to jump above the 20DMA at 8.18 euro. 

Should the price remain in the channel, the first support will be the 8.00 euro level which is not only psychologically important, but also close to a Fibonacci line at 8.02 euro. Should the price slip below 8.00 euro, last week's low at 7.95 euro and the 50DMA at 7.94 euro could be tested.

Source: Bloomberg L.P.

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