Monday, October 31, 2016

EUA Dec16: 20DMA to be the first strong support

After the rally the Friday before the EUA Dec16 took a break and declined by 1.4% last Monday. The price opened 1 cent below the settlement price of the previous Friday and even tried to climb higher hitting an intra-day high at 5.98 euro, but it was not able to keep its gains and break above the 6 euro level.
The benchmark carbon contract opened higher early Tuesday and reached an intra-day high at 5.96 euro before retreating steadily. The auction cleared weaker than normal and the result triggered abrupt selling. The EUA Dec16 contract plummeted to 5.62 euro before recovering in the afternoon session. The Dec16 contract ended at 5.81 euro, flat from Monday’s close.
Supported by higher power prices and an appealing dark spread, the EUA Dec16 had a strong start to the day on Wednesday. It opened at 5.84 euro, a 3 cents gap from Tuesday’s settlement. The price increased continuously during the day to hit an intra-day high at 6.04 euro. This was the first time in five days, when the price managed to climb above the 6 euro level. It was, however, not able to remain above the psychological limit and closed at 5.94 euro, still a gain of 2.2%.
The price moved in a range of 22 cents on Thursday. After hitting an intra-day high at 5.97 euro in the morning hours, the price declined continuously during the day to reach a daily low at 5.75 euro. By the end of the day it managed to recover slightly, but still finished with a loss of 2.2%.
The intra-day range was even narrower during most of Friday (5.71-5.86 euro), but some late buyers arriving in the last 10 minutes of trading lifted the price to an intra-day high of 5.91 euro. The price finished just 3 cents lower, resulting in a gain of 7 cents or 1.2%.
The sideways movement of the last days led the EUA Dec16 to the lower edge of the increasing trend channel. It consolidated below 6 euro, a resistance level tested almost every day of the past week. From the downside, however, the 20DMA proved a strong support.
Without major carbon market events scheduled for this week the consolidation might continue, although power prices and central bank meetings can overwrite the picture. The first support is the 20DMA at 5.69 euro, followed by a local low near 5.50 euro. To the upside, the first important resistance is the 6.00 euro level, followed by the October high at 6.14 euro.

Source: Thomson Reuters

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