Monday, March 21, 2016

EUA Dec16: Consolidation near 5 euro

Carbon took direction from declining crude oil prices last Monday after it seemed unlikely Iran would be willing to cut production until output hits 4 million barrels per day, approximately 25% up from current levels. The EUA Dec16 contract closed down 0.12 euro from the previous 

The EUA Dec16 opened at 4.87 euro on Tuesday, 1 cent below Monday’s settlement price. It only managed to climb higher 3 cents during the day, fell to an 8-day low at 4.77 euro and finished the day at its opening level. By the end of the day the price left a doji candle suggesting that traders are hesitating about which direction the price might take. 

The benchmark carbon contract climbed above 5 euro on Wednesday, but the traded volume remained low as the market was waiting for the US Federal Reserve's communication about its rate hiking path. The price opened at 4.87 euro (Tuesday’s close and the intraday low) and climbed step by step until reaching 5.01 euro in the afternoon. It was, however, not able to keep these gains and closed below the critical 5 euro level (again).

After a strong opening the weak auction result pushed the benchmark carbon contract back below 5.00 euro on Thursday. Thanks to a rally in the last 90 minutes of trading however the price climbed to an intraday high at 5.04 euro. The price then closed at 5.01 euro. The afternoon rally and the settlement price above 5 euro increased optimism about the price performance on Friday.

Despite some hesitation in the morning when the price fell to 4.92 euro, the price got impetus from a strong auction result and retested the Thursday high at 5.04 euro. The close was less rosy with a settlement below 5 euro again.

The price is moving in a declining triangle. The 2016 low (touched 11 and 17 February) at 4.62 euro represents the lower (horizontal edge). The upper edge is declining as the highs reached since 22 February are lower and lower every week. (See chart on page 2.) This declining line might limit gains this week as there is not much that could help the price in breaking this resistance.

The 20 and the 30DMAs met on Friday at 5.00. If the former is able to climb above the latter, it would be a positive sign for the next days.

Until the publication of the verified emissions data for 2015, however, there is no event expected to influence the price. The EUA Dec16 might therefore consolidate around 5 euro this week again.

Source: Bloomberg L.P.

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