Monday, May 23, 2016

EUA Dec16 stable before the publication of the report of the rapporteur

The EUA price strengthened on Monday as jumping oil prices lifted the power prices. The Dec16 contract closed at 6.11 euro, up 0.26 euro from last Friday. The technical picture got brighter as the price increased above the 20 and 100DMAs and the 6 euro psychological level.

Helped by a positive global mood, the price jumped to 6.18 euro in Tuesday’s opening but a Fibonacci level there stopped the rally and pushed the price back towards the 20DMA. A weak auction pushed then the price further down below the 20DMA and the 6 euro level, but higher German power helped the EUA in climbing back above 6 euro by the end of the day.

The EUA Dec16 started Wednesday on a downward slope in tandem with the price of German front year power, gas prices and Brent. It hit an intra-day low at 5.88 euro before noon. The 30DMA at 5.86 euro worked as a support. The price didn’t tremble from the delay of the ENVI report either. The closing brought a new intra-day high to Brent and to the EUA Dec16 (at 6.10 euro).

With Brent 2% lower in the morning, the EUA Dec16 started Thursday with sharp losses and fell below the 30DMA (at 5.91 euro) to an intra-day low at 5.85 euro. The late recovery in oil prices helped the EUA climbing back higher and the benchmark contract closed at 6.00 euro. The price movements during the day resulted in a dragonfly doji candlestick which is generally a bullish signal.

The benchmark carbon contract moved in a narrow range of 11 cents between 5.95 and 6.06 euro on Friday. The range corresponded roughly to the 20 and 30DMAs. The dragonfly doji proved a wrong signal as the price fell 3 cents from Thursday's settlement price and closed below 6 euro. 

The price is consolidating near the 6 euro level before the publication of the ENVI report about the post-2020 reforms by the rapporteur Ian Duncan. It will be interesting to see how market will react on the report if it is published in the second half of the week when many market participants will be travelling to the Carbon Expo in Cologne.

The auction supply will remain relatively stable from last week (13.8 million EUAs to be offered).

The RSI is in the neutral territory (52). The 5.80-6.20 euro range might keep the price before the ENVI report is published.

Source: Bloomberg L.P.

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