Monday, March 7, 2016

EUA Dec16: Consolidation near 5 euro

Last Monday, the EUA Dec16 shocked market participants with opening at 4.92 euro, 8 cents below Friday’s settlement price. It fell to an intraday low at 4.85 euro after the EUA auction cleared at a decent discount to the secondary market price and reached the lowest cover ratio since 25 June. The price recovered later in the afternoon and closed 1 cent above Friday’s settlement price.

Due to weak manufacturing data from China in the morning, the benchmark contract opened 2 cents below Monday’s settlement price on Tuesday and slipped to an intraday low at 4.92 euro. The strong auction result, however, reversed the direction of the price and pulled it to 5.12 euro. The 20DMA stopped the appreciation and the price turned lower again in the afternoon. Tuesday’s candle is a doji, indicating uncertainty in the market about which direction to take.

Despite starting the day in a positive mood, the price of EUA Dec16 plummeted to an intraday low at 4.83 euro on Wednesday. Some late afternoon buyers, however, pulled the price back close to 5 euro after the better than expected employment data from the US. The price finished the day at 4.97 euro, a 3 cent loss from Tuesday’s settlement price. Wednesday was the fourth day when the price closed near 5 euro and after Tuesday the price formed a doji candle again. All these are signals about the market hesitating about which direction to take.

The EUA Dec16 opened in a negative tone on Thursday as market participants expected an update about the 2016 free allocation of allowances. An unexpectedly strong auction result pulled the price higher, but after the disappointing comments of the post-2020 reform rapporteur, sellers overtook the floor in the afternoon and pushed the price to 4.77 euro. The recovery before the market closed lifted the price back to 4.90 euro. The contract closed 1.4% below Wednesday’s settlement price.

The same level at 4.77 euro stopped the depreciation on Friday as well, although the price was quite weak during the whole day. Friday’s candle is another doji (after Tuesday’s) showing uncertainty of the market about which direction to take. The first support is at 4.77 euro (the intraday low from last Thursday and Friday), followed by a local low at 4.67 and the 2016 low at 4.62 euro. To the upside, after the 20DMA the next resistance might be a local high at 5.12 euro, and another at 5.24 euro.

Indecision and sideways movement characterize the chart. the range of the last three weeks between 4.60 and 5.50 euro is still unhurt. 

Source: Bloomberg L.P.

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