Monday, December 28, 2015

EUA Dec16: Quiet week expected

After a weak start, the EUA Dec16 started to rally Monday noon. The contract closed 13 cents (+1.6%) above the settlement price of the Friday before. The rally accelerated in the afternoon when the German front year power climbed into positive territory and the euro appreciated 0.4% versus the US dollar.

The force remained with carbon on Tuesday as well. The price jumped to 8.36 euro in the morning hours to move sideways in a 2 cents range in the afternoon amid thin liquidity. The bellwether contract closed the session at 8.32 euro, some 0.06 euro higher compared to the previous close. A total of 6.1 million allowances changed hands on ICE in the benchmark contract of which 900,000 where block trades. The price was approaching the 100DMA at 8.37 euro and the 20DMA at 8.41 euro, but didn’t reach them.

The dark side took over the trading floor on Wednesday, when less than 4 million allowances traded and the EUA Dec16 declined 5 cents in a daily comparison. Despite hitting a new local high at 8.38 euro in the morning, the price was not able to maintain its gains. The benchmark closed 3 cents below Tuesday’s settlement price.

The price moved in a narrow range of 11 cents between 8.21 and 8.32 euro on Thursday. The traded volume of less than 2 million allowances suggested that most of the market participants were busy with decorating the Christmas tree instead of trading carbon.

With the holiday season continuing this week as well, the price might consolidate around current levels. Our base range of 8.00-8.40 euro might seems wider than usual, but the volatility might increase in a thin market when it’s easy to swing the price even with a small volume. The MACD is in the negative territory, but seems to be crossing the signal curve, which would be a positive sign. 

The RSI at 43 is in neutral territory.

Support levels are seen at the 200DMA (7.95 euro), the lower Bollinger band (8.01 euro) and a Fibonacci level at 8.20 euro.

There is a strong resistance building at 8.40 euro with the 20 and 100DMAs waiting there. This level is followed by a Fibonacci level at 8.55 euro.

Source: Bloomberg L.P.

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