Monday, February 29, 2016

EUA Dec16: Continuous supply keeps a pressure on the price

Supported by rising oil prices the EUA Dec16 opened Monday 7 cents above last Friday’s settlement price and after a short hesitation it rallied to 5.49 euro in the afternoon. After having tested it twice the week before, the price finally managed to break above the 20DMA.

The Brent which pulled the price higher recently, failed to support the EUA Dec16. The price opened 2 cents below Monday’s settlement price on Tuesday and left a 1 cent gap before turning lower. The contract was falling the whole day long until it reached an intraday low at 4.92 euro. Despite losing almost 9%, the price did not return into the declining trend channel of 2016.

The decline continued Wednesday morning as the Brent got under pressure from Saudi Arabian and Iranian comments. The price fell to a weekly low at 4.67 euro, just 5 cents above the 22-month low of 4.62 euro, but recovered by the end of the day to close at 4.87 euro, 4 cents below Tuesday’s settlement price.

Thursday’s white candle lifted the price above 5 euro, where it consolidated on Friday as well.
In the last three weeks the price moved in a channel between 4.62 and 5.50 euro. It slowly slipped out sideways from the declining trend channel and although it didn’t change the trend yet, the fact that it didn’t hit a new 22-month low since 11 February could make some market participants optimistic regarding the price performance in the next days.

On the other hand, the huge supply (everyday auctions and the 2016 free allocation being handed out these days) and the weak energy prices continue to weigh on the price.
After the psychologically important 5 euro level, the next strong support is seen at 4.62 euro. This level has been tested twice already in February, but the price stopped 5 cents above this level last week.

To the upside, the 20DMA at 5.15 euro represents the first resistance, followed by 5.50 euro, also tested three times recently. The 30DMA is just 4 cents above this level.

All in all, there seems to be a strong range between 4.62 and 5.50 euro, that keeps the price for the time being.

Source: Bloomberg L.P. 

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