Monday, January 4, 2016

EUA Dec16: MACD cross might be supportive this week

With most of the UK still on holidays, the EUA Dec16 had a sleepy start to the week. The price moved in a range of 4 cents between 8.28 and 8.32 euro in the first half of the day. On the positive side, it opened with a  2 cents gap above the settlement price of the Friday before. The price started to rally in the last hour of trading when it jumped from 8.32 euro to 8.40 euroland closed 1.5% above Friday’s settlement price.

EUA prices softened on Tuesday, ignoring the upward move in power and crude oil prices. The Dec16 contract opened higher at 8.40 euro, two cents above the previous close. Prices then gradually drifted lower throughout the afternoon to intraday low at 8.29 euro. The bellwether contract recouped some losses in the final hour of trading to close the session at 8.34 euro, down 0.04 euro from the previous close. Trading volumes are slightly higher, but remained at low levels with 3.1 million allowances changed hands on ICE for the Dec16 contract.

On Wednesday the EUA Dec16 closed another day with declines. It opened at 8.33 euro, 1 cent below Tuesday’s settlement price and declined during the whole day until hitting the weekly low at 8.26 euro. With this move, it closed the gap left from Monday/Tuesday. The gap therefore ceased to function as a support.

The benchmark contract opened at the same level (8.33 euro) on Thursday and declined during the whole day to hit an intra-day low at 8.27 euro (one cent higher than the day before) and to the week and the year 2016 at 8.29 euro.

The EUA Dec16 gained 11% in 2015 and we expect the long term increasing trend to continue in 2016 as well.

Although the MACD crossed the signal curve last week, as the first week of 2016 lacks EUA auctions and political news, we have a neutral outlook for the week. The price might remain in the range we saw in the last week of 2015: between 8.20 and 8.40 euro.

Source: Bloomberg L.P.

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