Monday, May 9, 2016

EUA Dec16: Bearish MACD makes us looking for support levels

Thanks to falling German power and Brent prices the EUA Dec16 lost more than 5% last week.

Despite opening 7 cents above last Friday’s settlement price and hitting an intra-day high at 6.28 euro, the EUA Dec16 depreciated continuously on Monday. It fell below the 100DMA at 6.07 euro and hit an intra-day low at 6.02 euro. By the end of the day, however, the price climbed back above the 100DMA and closed at 6.11 euro. The end of the compliance period and the UK holiday dampened the demand for allowances.

The EUA Dec16 contract continued its downward correction on Tuesday, closing the session at 5.99 euro, some 0.12 euro lower than the previous close and closing below the 100-day moving average.

On Wednesday, the EUA Dec16 opened at Tuesday’s closing price exactly and fell to an intra-day low at 5.91 euro not much later. The strong UK auction and the higher German power price, however, lifted the carbon above 6 euro again. The price hit an intra-day high at 6.29 euro and closed just 9 cents below this level.

The EUA Dec16 opened 4 cents above Wednesday’s settlement price and hit the Marabozu line at 6.58 euro on a stronger energy complex, before falling back to 6.20 euro on Thursday. The fall pushed the MACD below the signal curve, which is a bearish signal. The candle by the end of the day also showed the lack of strength. Volume was surprisingly high, although many market participants were on holiday.

Lower Brent price pushed the EUA Dec16 3 cents below Thursday’s settlement price in Friday’s opening. The carbon price fell hand in hand with the front year German power in the afternoon to hit an intra-day low at 5.84 euro. The price closed at 5.86 euro and below the increasing trend channel of April.

The technical picture became rather bearish last week with the MACD crossing the signal curve, the price falling from the trend channel and a close below 6 euro. Fundamentals with an auction supply of 14 million, and a weak energy complex might also weigh on the price. The first support is the 30DMA at 5.66 euro. (5.67 euro used to be a resistance in April and might have changed its role.) The next support might be a Fibonacci level at 5.56 euro, followed by another at 5.20 euro and the 5.00 euro level.

Should, however, the dark spread remain appealing, it might limit the losses of the price. In a positive scenario, the price has to beat the 20 and 100DMAs first, at 5.91 euro and 5.96 euro, respectively. The next resistance is a Fibonacci level at 6.13 euro, followed by last week's high at 6.55 euro (strengthened by a Fibonacci level at 6.49 euro).

Source: Bloomberg L.P.

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