Monday, November 16, 2015

Pressured by lower German power prices and dark spread, the EUA Dec15 fell to a 3-week low last Monday. The price continued its decline Tuesday morning as well, and hit a new 4-week low  at 8.28 euro. At this point, however, there were many supports: the 50DMA, a Fibonacci level and the lower edge of the declining trend channel. In addition, the German front year power price turned higher (for the first time in five days) and the European 2016 coal price fell to a record low. All these factors helped the benchmark carbon contract in gaining 1.4% on Tuesday and in climbing back above the next Fibonacci level and the 30DMA at 8.39 euro. The price closed at 8.44 euro.

The appreciation accelerated Wednesday morning, when the price reached the next Fibonacci level at 8.51 euro. The weak auction result and falling German power prices, however, changed the direction of the benchmark carbon contract which fell to an intraday low at 8.37 euro and closed unchanged compared to Tuesday’s settlement price.

The German front year power price falling to a new record low exercised a pressure on the EUA Dec15 on Thursday. The price fell to a daily low at 8.32 euro, but the 50DMA at 8.30 euro limited further losses. Despite being on a roller-coaster the whole day long, the EUA Dec15 remained in the usual ranges: in the November declining trend channel and between the 50 and 20DMAs.

The ranges mentioned above kept the price on Friday as well. The EUA Dec15 moved in a narrow range of 8 cents during the day.

The price was not able to break out from the declining trend channel last week and it might remain under pressure this week as well due to the abundant supply of allowances, a weak energy mix and a general risk-off mood in the markets after the terror attacks in Paris last Friday.

The base range for this week could be between the 50 and 20DMAs, at 8.31 euro and 8.49 euro, respectively. Should the price break out of this range, the next resistance is the 2015 high at 8.71 euro. The closest support to the 50DMA is a Fibonacci level at 8.19 euro.

Source: Bloomberg L.P. 

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