Monday, January 18, 2016

EUA Dec16 below 7 euro

The EUA Dec16 didn’t care about the fact that the relative strength index (RSI) finished the week before deep in the oversold territory already. The benchmark carbon contract finished the week 8% lower again and pushed the RSI even lower.

The week started in a negative mood and the price fell to a new 2016 low at 7.11 euro. The contract extended the losses until 7.01 euro on Tuesday, but it managed to climb back by the end of the day. The doji candle of the day made market optimistic about a turn around and Wednesday seemed to confirm hopes. The price opened above Tuesday’s close and gained 2% in a daily comparison.

Thursday and Friday, however, bears took over the market and pushed the price lower continuously until it fell below 7 euro and hit a new 10-month low at 6.68 euro on Friday.

There are (and were last week already) technical signals saying that there should be a correction in the price, but the market doesn’t seem to care about technical analysis at the moment.

The RSI is deep in the oversold territory (at 17). The MACD at low levels not seen since April 2014. In addition the price fell from the two year increasing trend channel.

The first support level is the lower Bollinger band at 6.84 euro, followed by last week’s low at 6.63 euro, and local lows at 6.50 euro and 6.38 euro.

Only 14 million EUAs will be auctioned this week, 0.3 million less than last week. This might support the price of allowances. Should buyers find current levels attractive enough to purchase EUAs, the resistance levels the price has to break are some Fibonacci lines at 7.03 and 7.28 euro, and some Marubozu lines at 7.36 euro and 7.96 euro. Also, if we check the long term (three years chart), we find that last week’s low is at the lower edge of the trend line increasing the probability of a correction.

Source: Bloomberg L.P.

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