Monday, June 29, 2015

EUA Dec15: Greferendum weighs on markets

The EUA Dec15 had a positive start to last week as the new Greek reform proposals caused optimism among traders. The carbon appreciated in tandem with the euro, the German front year power and dark spread. Gains, however, disappeared soon with the euro weakening back and the pushing the dark spread back to 3.80 euro. Balance was found around noon time at 7.45 euro.

In the lack of major news from the carbon or financial markets, the benchmark contract oscillated in a narrow range between 7.47 and 7.54 euro on Tuesday. The price closed 2 cents higher, which was enough for the 20DMA to cross the 30DMA from below giving a bullish signal to traders.

After visiting the 30DMA at 7.46 euro in the morning, the price rallied to the Monday high of 7.56 euro on Wednesday while the German economy minister Sigmar Gabriel was speaking in Berlin about the importance of keeping coal fired power plants in the system. The EUA Dec15 continued its sideways movement and fell just one cent compared to Tuesday’s settlement price.

The price rallied to 7.62 euro in Thursday’s opening accompanied by a significant volume which suggests that some stop-loss orders might have been triggered at 7.56 euro, which was the weekly high until now.

Difficult Greek negotiations with creditors overshadowed the performance of the EUA Dec15 on Friday, but the benchmark contract was still able to close the week with a modest gain of 0.7% w/w.

The end of negotiations between Greece and its creditors during the weekend worsened international investor mood significantly today in the morning. The EUR/USD started the day with a gap down, Asian stock indices fell sharply and the EUA Dec15 lost more than 4% in the first minutes of the trading session. The low from 28th of May near 7.20 euro which is a Fibonacci retracement level as well, stopped the depreciation for the time being. The next support level is the 200DMA at 7.01 euro. 

Below this level local lows from 14th April (6.76 euro and 13th March (6.28 euro) are to be tested.
In the case of a correction, the 30 and 20DMAs at 7.44 and 7.51 euro, respectively are the first resistance levels to be broken.

Source: Bloomberg L.P.

Monday, June 22, 2015

EUA Dec15: MACD warns of further possible losses

The week started in a negative mood after talks between Greece and its creditors were halted after 45 minutes last Sunday. The EUA Dec15 opened at 7.64 euro, the closing price from 12th June, but was not able to break this resistance level.

The EUA Dec-15 contract continued its correction from the 7.64/t resistance level during Tuesday’s session. The bellwether contract closed at 7.45/t, some 0.10/t lower than the previous close amid the Greek debt crisis worsening.

Intraday volatility declined further on Wednesday when the benchmark contract moved between 7.44 and 7.54 euro. Opening (7.49 euro) and closing (7.50 euro) prices were close, suggesting hesitation of the traders about the future direction of the price. On the positive side, the contract managed to remain above key support levels at the 20 and 30DMAs at 7.43 and 7.48 euro, respectively.

Thursday saw a good start to the day after the euro appreciated versus the US dollar which lifted the front year German dark spread near 4 euro again. In addition, analysts at Bernstein told Bloomberg they expected the EUA to jump to 13 euro this year already. The weak performance of the German dark spread due to the appreciation of European coal prices, however, put a pressure on the EUA Dec15 price which closed at 7.48 euro, just one cent above the daily low of 7.47 euro. All in all, the price moved in an extremely narrow range of 6 cents and the volume traded hardly surpassed 4 million. Still the movement was enough for the MACD to cross the signal curve giving a bearish sign to those traders who didn’t leave for holidays yet.

The benchmark contract opened at the psychologically important 7.50 euro level on the last trading day of the week and slid continuously during the day. It even dropped shortly below the 20DMA at 7.44 euro and closed the day and the week exactly at this critical level.

The benchmark contract took a downward path last week (confirmed by the MACD crossing the signal curve). Should it continue into this direction, after touching the 7.37 euro local low from 8th June, the price has the room open until 7.20 euro. Should the bulls take over the floor thanks to speculation on new documents from Brussels, the 7.64 euro level will be the first major resistance to overcome.

Source: Bloomberg L.P.

Monday, June 15, 2015

EUA Dec15: Low volumes and range bound trade indicate start of summer

Despite opening below the 20DMA last Monday, the EUA Dec15 gained 4 cents to close above the moving averages. The benchmark contract held on to gains on Tuesday as well with a spectacular rally when the price hit a new three-weeks high at 7.63 euro.

Tuesday daily high has been retested on Wednesday and even hit a new three-week high at 7.64 euro after appreciating the whole day long.

After four consecutive days of gains the EUA Dec15 took a brake and closed 8 cents lower, at the daily low on Thursday. The price fell to 7.52 euro Friday morning, but later in the day the benchmark contract reversed losses and closed the day and the week at its highest point.

Last Friday’s close suggests that despite the negative investment mood around the world due to the Greek debt situation and the low volumes in the carbon market , the EUA Dec15 might be strong enough to retest the May high at 7.75 euro. If so, the price would return into the increasing trend channel it dropped from in May.

In tandem with last week’s appreciation the Relative Strength Index climbed to 60. There are still 10 points to reach the overbought territory, which might be still enough for the benchmark contract to reach the 7.75 euro level.

Should traders opt for taking profit, the first support level would be the 30DMA at 7.48 euro, followed by the 20DMA at 7.43 euro.

Looking at the chart from a longer perspective, the price moves sideways in the range between 7.18 and 7.75 euro for two months already (approximately since the compliance period ended). Lack of political news and summer holidays might keep the price in this range for the next weeks as well.

Source: Bloomberg L.P.

Monday, June 8, 2015

EUA Dec15: Lack of political news leaves benchmark contract without direction

The EUA Dec15 edged down in early trading session last Monday mainly influenced by a narrowing clean dark spread. Prices recovered slightly after strong auction results, but still remained in negative territory throughout the rest the day. The bellwether contract closed the session at 7.28 euro, down 0.08 euro from the previous close. 

Hopes for a solution of the Greek debt situation provided momentum to the euro and the German power prices on Tuesday. The benchmark carbon contract moved in tandem and was lifted above the 20 and 30DMAs at 7.45 and 7.43 euro, respectively. The intraday range widened from 0.14 euro on Monday to 0.24 euro. As a consequence, the MACD climbed back into positive territory again.

Although less vehemently, but the appreciation continued on Wednesday. The EUA Dec15 hit a 2-week high at 7.58 euro and remained above the moving averages which at the same time changed their respective positions. The 20DMA crossed the 30DMA from above, providing the first bearish signal of the week.

This was followed by Thursday’s black candle which together with Wednesday’s white one forms a bearish engulfing. Despite the lack of an EUA auction (due to a public holiday in Germany) the EUA Dec15 closed below the 20 and 30DMAs.

Friday’s doji candle shows some hesitation of traders about the future direction of the price.

Despite the nice rally on Tuesday and Wednesday the price was not able to climb back into the short term increasing trend channel.

Due to the factors mentioned above the technical picture looks fragile. In addition, auction volume this week increases by 6 million compared to last week. Our range for this week is therefore between 7.19 euro (a Fibonacci retracement level) and 7.59 euro (last week’s high).

After the first impact assessment about the post-2020 review of the EU ETS Directive which has been rejected by the impact assessment board we expect the European Commission to work on a new version and leave the market without direction until it's finished.

The Relative Strength Index (RSI) being in neutral territory (at 53) suggest further sideways movement.

Source: Bloomberg L.P.