Monday, August 14, 2017

EUA Dec17: Auction volume to decrease further due to public holiday

After a relatively strong start the EUA Dec17 turned lower last Monday morning. The decline accelerated after the auction cleared at a 6 cents discount to the secondary market, and the price hit a daily low at 5.27 euro. The improving dark spread helped the price in recovering until 5.32 euro in the afternoon, but the price turned lower in the afternoon again to finish the day with a loss of 1.3%. To reflect summer mood, the traded volume fell further from the daily average of 7.7 million seen last week to 3.7 million.
The EUA Dec17 contract opened Tuesday’s session at 5.32 euro and traded between 5.25 euro and 5.34 euro, before ending the day at 5.27 euro, where it also closed on Monday. A modest volume of 4 million EUAs were traded.
Despite opening one cent below Tuesday’s settlement price, the benchmark carbon contract recovered quickly and hit a daily high at 5.41 euro already before Wednesday noon. The price received good support from a strong energy mix. Especially, the improving dark spread had a positive effect. As a consequence, the price finished the day with a gain of 10 cents (+1.9%). After trading close to the lower edge of the increasing trend channel for two days, the EUA Dec17 returned higher and the risk of breaking below the trend channel decreased again. Tuesday`s and Wednesday`s candles formed a bullish engulfing, generally a positive sign, although the low summer volume does not support the technical signal.
The EUA Dec17 opened with a two cents gap up on Thursday and explored levels not seen since 19 July by hitting 5.47 euro during the day. Although power prices climbed higher, the rally in coal prices deteriorated the German dark spread and weighed also on the price of allowances. As a consequence, the price gave back all its gains from the day, and closed at 5.37 euro, unchanged from Wednesday’s settlement.
The price had a relatively volatile day within a 12 cents range on Friday. The price started the day at Thursday`s settlement level and slipped briefly to a daily minimum at 5.34 euro to climb to 5.46 euro early in the afternoon. By the end of the day the price returned close to its opening levels and kept only 2 cents from its gains.
Thanks to the reduced auction supply and the higher power prices, the increasing trend channel is unhurt and is expected to keep the price also this week.
There will be a total of 8.9 million allowances auctioned this week, 17.1% less than last week. There will be only four auctions this week due to a public holiday in Germany on Tuesday (Assumption Day). 
The lower auction volume will continue to support the price of allowances this week again, but temperatures returning to or below the seasonal average will decrease the demand for power for air conditioning, potentially also reducing the demand for allowances. We therefore expect the price of allowances to move between 5.20 and 5.62 euro this week.


Source: Bloomberg, ICE


Monday, August 7, 2017

EUA Dec17: First week of reduced auction volume brought a gain of 3.3%

Although it opened the day flat compared to previous Friday’s settlement, the EUA Dec17 fell quickly to a daily minimum at 5.10 euro Monday morning. The shock didn’t last long and the contract recovered to trade comfortably between 5.19 and 5.23 euro before the auction. The strong auction result then lifted the price to a new daily maximum at 5.29 euro. The worsening of the dark spread capped the gains. The benchmark contract therefore finished the day at 5.23 euro (+1.0% d/d). Monday’s candle was another doji, indicating the uncertainty of market participants about which direction to take. On the other hand, the 30DMA climbed above the 200DMA, generally considered as a positive signal. The traded volume of 5.7 million in the most liquid contract reflected summer mood already.
The benchmark carbon market moved flat in the first hours of trading on Tuesday, but the surprisingly strong auction result lifted the price to a daily maximum of 5.38 euro. Traders realized shortly after the auction that the high clearing price might have been a mistake and does not reflect real demand for the allowances. So the price returned to 5.30 euro where it stagnated until the end of the day. The closing price represents a gain of 7 cents (+1.3%) to Monday’s settlement. The price closed at the upper edge of the 5.10-5.30 euro range it was trading last week. It also managed to close above the 20DMA.
The EUA Dec17 traded comfortable in a range between 5.25 and 5.30 euro most of Wednesday. In the afternoon however buyers lifted the price above the strong resistance level at 5.30 euro. The price was unstoppable until 5.43 euro, a level not seen for 2 weeks. The price remained close to its daily maximum and settled at 5.43 euro, a gain of 2.5%.
The front year contract opened with a two cents gap down on Thursday and fell quickly to a daily minimum at 5.37 euro. Although the settlement price of the auction was slightly below the secondary market price, the cover ratio was the second best for the week, so the price started climbing higher again in the afternoon. The daily maximum was 5.45 euro, a 2-week high. By the end of the day the price retreated a little, and closed the day at Wednesday’s settlement price, at 5.43 euro.
After opening at Thursday’s settlement price, the EUA Dec17 was able to hit a daily maximum at 5.46 euro, but after the weak auction, sellers pushed the market lower continuously. Price hit a daily minimum at 5.32 euro and stopped just above the 20DMA. The price was not able to recover, and closed the day (and the week) at 5.35 euro.

Beside the energy fundamentals, auction results will be the most important factors to influence the price of allowances. As market participants had enough time to price in the reduced auction supply, we expect the price to move between 5.00 and 5.60 euro.


Source: Thomson Reuters, ICE

Monday, July 24, 2017

EUA Dec17: Last week with complete auction volume before August

The sell-off last Friday sent the benchmark carbon contract more than 6 lower in a weekly comparison.
The EUA Dec17 had a sleepy start to last week. The price traded comfortably in a 10 cents range between 5.39 and 5.49 euro. No new local minimum or maximum was reached. The price closed at 5.44 euro, closer to the upper edge of the daily range (+0.4% d/d). The traded volume decreased further. Last Thursday 18.5 million allowances traded in the benchmark contract, the Friday before this fell to 9.5 million and on Monday to 7.6 million.
The price of allowances posted another day of marginal gains on Tuesday. The front-year carbon contract rose steadily throughout the session receiving a push from the healthy auction results to test the upside at 5.58 euro in the late afternoon. However, the last half an hour of trading brought the prices back and they slipped almost to the daily lows. The EUA Dec17 contract closed the session at 5.46 euro, up 0.02 euro from the previous close.
The benchmark carbon contract was held in a 10 cents range on Wednesday. The price held relatively stable the whole day, but in the last hour of trading sellers pushed the price down by several cents. The EUA Dec17 finished the day at 5.39 euro, down 7 cents from Tuesday.
The price of the EUA Dec17 traded in a 5 cents range until noon on Thursday, but due the selling pressure in the last hour of trading the EUA Dec17 closed at its daily minimum, at 5.30 euro on Thursday, a loss of 9 cents or 1.7%.
Although Thursday’s close at the daily minimum did not bode well for Friday, the EUA Dec17 opened stable on the last trading day. News about a stricter EU process regarding diesel cars however soured the investor mood globally. Brent lost 2.5%, stock markets turned sharply lower and the carbon market was no exemption. The EUA Dec17 fell to a daily minimum at 5.07 euro and was not able to recover by the end of the day, finishing the week with a loss of more than 6%.
The negative mood that reached the market last week might be dented by the fact that daily auction volumes will be halved soon. 
Sellers pushed the price on Friday below the main moving averages, but the price only fell to the lower edge of the increasing trend channel that started mid-May and managed to remain in it. Should the price fall from the trend channel, the first strong support is the June minimum at 4.77 euro.
If the looming reduced supply supports the price enough, the benchmark contract might retest the Fibonacci level at 5.36 euro.



 Source: Thomson Reuters, ICE

Monday, July 17, 2017

EUA Dec17: New 4-month high reached last week

The benchmark carbon contract hit a new 4-month high and gained 1.5% last week helped by stronger fundamentals.
The EUA Dec17 opened the week with a 6 cents gap up that was not filled completely on Monday. The price of allowances increased continuously in tandem with the price of German power. When latter hit a new 2-year high at 32 euro per MWh, the price of carbon reached 5.56 euro, a level not seen since March. When power prices started weakening in the afternoon, the EUA Dec17 also turned lower. It hit a daily minimum at 5.35 euro and finished the day with a marginal gain of 1.1% at 5.40 euro. Monday’s candle is a shooting star (long upper shadow, short lower shadow and very small body), a warning signal that the price could enter a phase of correction after trading above the upper Bollinger band.
Although the price opened with a 3 cents gap down on Tuesday, it was able to climb to a daily maximum at 5.49 euro in the morning. (Monday’s high at 5.56 euro could not be reached.) The weak auction result and the lower power prices pushed the price lower step by step in the afternoon. The contract hit a daily minimum at 5.27 euro, but managed to climb back higher by the time the market closed. The EUA Dec17 finished the day at 5.33 euro, a loss of 7 cents or 1.3% in a daily comparison, so Monday’s shooting start candle seemed to provide a reliable signal.
Most of Wednesday, the benchmark carbon contract traded comfortably in a 10 cents range, but bulls lifted the price to a new daily maximum in the last hour of trading. The price of allowances was lifted by a rally in oil prices after data showed that US crude oil inventories declined more than expected. By the end of the day the EUA Dec 17 climbed 2.8% higher and closed above the upper Bollinger band again.
Positive market mood lifted the price of the EUA Dec17 Thursday morning to a new 4-month high at 5.62 euro (also a Fibonacci level). In the last hours of trading, however, the price of the German front year power turned lower and also some profit taking started in the carbon market, resulting in a daily loss of 2.2%.
Despite some initial hesitation that pushed the price to a daily minimum of 5.29 euro, the EUA Dec17 recovered Friday afternoon and closed the day with a gain of 1.1%.
Last week the price of allowances followed the components of the energy mix and was less impacted by the result of the daily auctions. This might change this week as the offered volume increases by almost 3% due to the Polish auction on Wednesday.
The stable increase of the price of German power, the improvement of the German dark spread and the recovery of the Brent, on the other hand, could counterbalance the negative effect of higher supply.

The technical picture is rather neutral for this week. Although the benchmark carbon contract trades most of the time at or above the upper Bollinger band, the relative strength index (at 63) leaves room for further gains. The price moves in an increasing trend channel since mid-May.




Source: Bloomberg, ICE

Monday, July 3, 2017

EUA Dec17: Consolidation near the 5 euro level expected

The benchmark carbon contract got support from strong auctions and higher power prices last week. As a consequence, it climbed back above 5 euro and gained 3.3% in a weekly comparison. 
After a flat opening Monday morning, the EUA Dec17 was able to climb two cents higher to a daily maximum at 4.89 euro, but then the price fell continuously during the day. Power prices got under pressure by the energy efficiency targets adopted by the representatives of the EU member states and the carbon price followed power down. The benchmark carbon contract hit a new monthly low at 4.77 euro, and was not able to recover by the end of the day. The price settled at 4.78 euro, just one cent above the daily (monthly) minimum. In the last four trading days the price hit a new local minimum every day, setting the start of a declining trend. The last two candles formed a bearish engulfing, another technical signal warning of further possible sell-off.

Despite the negative signals from Monday, the strong auction result (with the highest cover ratio since 22 May) and the good performance of the energy mix lifted the price of the EUA Dec17 3.3% higher on Tuesday. Market mood was positive already in the morning. As a result, the contract opened with a 6 cents gap that was not filled completely during the day. The two cents gap left between 4.78 euro (Monday’ settlement) and 4.80 euro (Tuesday’s minimum) will work as support in the next days. The price climbed back to 4.99 euro, but returned below the 20 and 30DMAs by the end of the day.
On Wednesday, the benchmark carbon contract moved in a narrow range of 10 cents between 4.88 and 4.98 euro. After the strong start in the morning the price moved sideways during the day and sellers pushed the price to the daily minimum, but then the contract was able to recover. The price closed at Tuesday’s settlement price at 4.94 euro. The traded volume of 7 million is in line with the June average. The sideway movement was not enough for the 20DMA to stay above the 30DMA which adds to the other bearish signals the chart provided recently.
Wednesday’s positive sentiment lifted the price of the EUA Dec17 further Thursday morning. The price climbed above the 5 euro level already in the first hour of trading and rallied higher during the day. It almost reached the 200DMA, but turned back lower from that resistance to close at 5.07 euro, a gain of 2.6%. The price opened and closed above the 20 and 30DMAs and it also settled above the 5 euro level. Thursday’s candle was the first one that closed outside the short term declining trend channel.
The price was not able to climb any further on Friday, but remained above the 5 euro level despite finishing the day with a  loss of 0.8%.
The chart of the EUA Dec17 provides mixed signals right now. 
On the positive / neutral side, the MACD did not slip below the zero line due to the positive days last week. The price even climbed above the short term declining trend channel that has been established in June. The relative strength index is in neutral territory (at 55).
On the other hand, the price found a strong resistance at the 200DMA at 5.16 euro and the upper Bollinger band at 5.13 euro. The 20DMA slipping below the 30DMA is another bearish signal.
Trading activity might be dented in the first two days of the week, due to the US bank holiday on Tuesday (Independence Day).
There will be five auctions this week, offering 22.1 million allowances slightly (+2.3% w/w) compared to last week. If auctions continue well bid, like we saw last week, they might support the price again.
All in all, we expect the price of the EUA Dec17 to move around 5 euro, between 4.70 and 5.30 euro this week.


Source: Bloomberg, ICE

Monday, June 26, 2017

EUA Dec17: Market expects progress in trilogue on Tuesday

Although the supply of allowances increased by more than 70% in a weekly comparison, the benchmark carbon contract only hit a new monthly low at 4.83 euro last week, but it finished with just a marginal loss of 0.20%.
As the season of daily auctions restarted, the EUA Dec17 fell to a daily minimum at 4.85 euro on Monday, a level not seen since 24 May. The carbon market had a negative start to the day, but recovered later during the day as the energy mix turned green and the cover ratio of the auction was above the June average. In a spectacular rally in the afternoon the price hit an intraday maximum at 5.01 euro, but was not able to stay above the 5 euro level. Due to the sell-off in the last 10 minutes of trading the price fell to 4.93 euro. The benchmark contract still finished the day with a gain of 5 cents (1.0%). The traded volume was above 10 million, for the first time since last Monday.
After a positive start the EUA Dec17 climbed continuously until early afternoon on Tuesday. The price hit an intraday high at 5.05 euro, before falling back below the 5.00 euro level. The Fibonacci level at 4.90 euro proved a good support and the price turned higher before the end of trading too. The closing price of 4.95 euro represents a daily gains of 2 cents (+0.4% d/d).
The EUA Dec17 had a weak start to Wednesday opening with a 6 cents gap down. The price was still able to jump to a daily maximum at 5.01 euro in the morning, but after a hesitation around 4.99/5.00 euro the price turned lower in the afternoon. Pressured by a weak energy mix, the benchmark carbon contract fell to a daily low of 4.87 euro in the last minutes of trading and was not able to recover by the end of the day. The price closed at 4.88 euro, a loss of 7 cents or 1.4%. The trading volume, on the other hand, was the highest this week as yesterday was the expiry day of the June options.
The benchmark carbon contract moved sideway in a narrow range before Thursday’s auction, but after the auction cleared with an above average discount, to the price well to a new weekly low at 4.83 euro, a level not seen since 24 May. By the end of the day the price only could climb 3 cents higher, losing 2 cents in a daily comparison.
The daily trading range shrank further to 8 cents on Friday. After opening one cent below Thursday’s settlement price the previous daily maximum t 4,93 euro was retested, but only 1 cent could be kept from the gains.
The price slips slowly lower, it fell already below the most important moving averages and gets away from the 5 euro level. Although most of the technical indicators are not providing any special signal (the MACD still above the zero line and the relative strength index at 48), the Bollinger bands are narrowing, but other technical indicators do not provide any new technical signal. 
The auction supply decreases a little bit this week as the UK auction on Wednesday offers some 0.6 million EUAs less than the Polish auction last Wednesday. 
Market participants will also keep an eye on the second trilogue meeting on Tuesday. Since the European Parliament and the Council adopted their official positions about the reform  of the EU ETS in February, practically nothing happened to the file. The first trilogue in April did not bring any results and the second meeting end of May was cancelled. 
The meeting on Tuesday will be the first "test" of the ambitiousness of the new rapporteur of the file, Julie Girling. Any progress on the file could have a positive effect on the EUA price as market participants would like to see future uncertainties about the market eliminated as soon as possible.
Due to the above we expect the benchmark carbon contract to move between 4.67 euro (a Fibonacci level and also a support in January and in spring) and the 5.00 euro levels.




Source: Bloomberg, ICE

Monday, June 19, 2017

EUA Dec17: Auction supply jumps after three weeks of price declines

Despite the reduced auction supply, last week was the third in a row when the benchmark carbon contract slipped lower.
The EUA Dec17 started the week flat to previous Friday’s settlement price. After a strong auction result, the price retested Friday’s maximum at 5.10 euro, but turned sharply lower in the afternoon. For some minutes it seemed that the 20DMA at 4.95 euro was able to keep the price from falling further, but in the last hour of trading the price plummeted to a daily minimum at 4.91 euro and was not able to recover by the time the market closed. The contract finished the day 2.4% lower, at 4.92 euro, just 1 cent above the daily minimum. The traded volume of 10.6 million was slightly higher than the June average of 9.5 million. The sell-off pushed the price to the lower edge of the increasing trend channel that has been established in the second half of May.
The EUA Dec17 rose for the first time in three days on Tuesday as auction supply dried and the energy mix was strong. Although the price fell below the 20DMA during the day, it managed to recover by the end of trading. The price finished the day at 5.01 euro, a gain of 1.8%.
As all financial markets were waiting for the next rate hike by the US Federal Reserve, the carbon price moved in a narrow range of 8 cents most of Wednesday. After the publication of the US crude oil inventory data, however, the price of Brent turned 3% lower and the carbon price followed suit. The EUA Dec17 hit a daily minimum at 4.90 euro, and was not able to climb back above the 5.00 euro level by the end of the day. The close below the 5 euro level and the 20DMA, and the bearish engulfing from the last two days were warning signals that the carbon price might fall further.
Most of the market participants were on holiday on Thursday, which had an impact on the traded range and volume of EUAs. The price moved in a narrow range and not even 7 million allowances traded in the benchmark contract. The price closed with a marginal gain of 2 cents as the positive effect of the lack of auctions was mainly cancelled by the weak energy mix.
The EUA Dec17 opened with a 2 cents gap down on Friday and still tried to retest the 5 euro level (also the 20DMA) in the morning. Fears about the increasing auction supply, however, pushed the price down continuously in the afternoon. The benchmark contract finished the week at 4.88 euro, a daily and weekly minimum and a level not seen since 7 June. 
The increasing auction supply started to weigh on the price last week already and the negative effect might continue this week as well. 
The deteriorating German clean dark spread is another factor having a negative impact on carbon prices.
The factors mentioned above pushed the price of the EUA Dec17 below the 5.00 euro level which is currently also the 20DMA and the 30DMA at 4.85 euro is quite easy to reach. The next support is the lower Bollinger band at 4.77 euro, followed by a Fibonacci level at 4.70 euro and a local low from March at 4.58 euro.
On the other hand, the RSI is in neutral territory and the MACD still in the positive territory. Should the price be able to consolidate or recover, the first resistance is the 5.00 euro level, followed by the 200DMA at 5.12 euro.


 Source: Bloomberg, ICE

Monday, June 12, 2017

EUA Dec17: Consolidation near the 5 euro level expected

The benchmark contract declined by an additional 2.3% last week.
On Monday when there were no EUA auctions, the EUA Dec17 hit a new 3-month high at 5.8 euro. The traded volume of 5.3 million allowances, however was well below the daily average for May because of a public holiday in many European countries.
The EUA Dec17 opened flat on Tuesday and remained relatively stable in the morning. The weak energy mix, however, pushed the benchmark carbon contract lower in the afternoon. The decline accelerated when the price fell below the 200DMA first, and then below the 5.00 euro level. The price hit a daily minimum at 4.93 euro, and was not able to recover by the end of the day. The contract settled at 4.97 euro, a loss of 20 cents (-3.9% d/d).
Although the benchmark carbon contract opened flat on Wednesday, it closed the day with a loss of 1.8%. In the morning the price still tried to climb back above 5 euro and reached a daily maximum at 5.04 euro, but the unexpected increase in the US crude oil inventories that pushed down oil and gas prices had a negative effect on the carbon price as well. It fell to a daily minimum of 4.87 euro, and was not able to recover by the end of the day. The closing price at 4.88 euro was the lowest since 23 May.
Starting from the 20DMA, the EUA Dec17 opened with a 2 cents gap up on Thursday and the gap has not been filled during the day which means that it will serve as a support. Thanks to the strong auction and the rally in German power prices the price broke above the 5.00 euro level and did not stop until 5.18 euro. The contract was not able to keep all its gains and closed at 5.05 euro, 3.5% above Wednesday’s settlement price.
The CO2 price moved in a narrow range of 10 cents on Friday. After opening at 5.05 euro, the price slipped 5 cents down, then climbed back and increased 5 cents. By the end of the day it returned to its opening level, producing a doji candle, a sign of uncertainty.
Most of the technical indicators suggest a consolidation to be expected in the next days. The relative strength index is at 53, and the allowances trade near the mid-Bollinger band. The lack of auction son Thursday (bank holiday in Germany) and on Friday (bridging) might support the price this week. 
The MACD, however, slipped below the signal curve on Friday, warning about the weakness of the price.
All in all, we expect the price of allowances to consolidate near the 5 euro level this week. 
Supports are seen at 4.96 euro (20DMA), at 4.95 euro (a Fibonacci level) and at 4.85 euro (lical low from February).
The first resistance is the 200DMA at 5.10 euro, followed by a Fibonacci level at 5.15 euro and the June high at 5.28 euro.


Source: Bloomberg, ICE

Sunday, June 4, 2017

EUA Dec17: Consolidation above the 5 euro level

With many traders on holidays due to the spring bank holiday, the EUA Dec17 remained stable on the first trading day of the week. The contract traded in a range of 9 cents. Although the price fell to a daily minimum at 5.13 euro, it remained above the 200DMA and was also able to recover to close at 5.17 euro (-0.4% d/d). Despite the loss the 20DMA climbed above the 30DMA on Monday, a positive signal.
The delay of the political negotiations and the restart of the daily auctions pushed down the price of the EUA Dec17 in the first half of the day on Tuesday to hit a daily minimum at 5.09 euro. The recovery in the afternoon was short lived and the contract closed at 5.14 euro, a loss of 3 cents or 0.6% in a daily comparison.
The benchmark carbon contract was relatively stable in Wednesday’s opening, but started to decline slowly after the auction. The movement accelerated in the last hour of trading, when the price fell below the 200DMA and the 5.00 euro level. The price was not able to recover and finished the day at 4.98 euro, a loss of 16 cents or 3.1%. 
The EUA Dec17 opened flat on Thursday and increased continuously during the day. The gains accelerated after the strong auction and the price hit a daily maximum at 5.14 euro. By the end of the day the price retreated slightly to close at 5.08 euro, a gain of 10 cents or 2.0%. The fact that the price managed to climb back above 5.00 euro was a positive fact.
Disappointment about the decision of the US President pushed the price of the EUA Dec17 below 5.00 euro  Friday morning again, but the commitment of the climate commissioner and the German Chancellor to the accord brought back investors’ confidence in the EU ETS, the Union’s main tool to achieve its emission reduction goals. The benchmark contract hit a daily maximum at 5.20 euro (the gains were halted by the local maximum at 5.22 euro) and closed the day 1.6% higher.
In the last 6-7 trading days the 5.00 euro level proved a good support. Should the slightly higher auction supply or a disappointing UK election result push the price lower, the next support is a Fibonacci level at 4.70 euro. To the upside, the 5.22 euro level is the first resistance to break, followed by a Fibonacci level at 5.30 euro and a local high from 5.47 euro.




Source: Thomson Reuters, ICE

Monday, May 29, 2017

EUA Dec17: Lack of auctions and higher power prices lifted the price above 5 euro

With only three auctions and the German front year power price climbing back above 30 EUR / MWh, the benchmark carbon contract was able to climb above 5 euro again.
The EUA Dec17 opened with a 6 cents gap up on the first trading day of the week. The strong auction lifted the price to a new 1-month high at 5.00 euro in the afternoon. After retreating from the daily maximum, the price closed at 4.91 euro, forming a doji candle that signals indecision of the market which direction to take.
After Monday’s doji candle, the EUA Dec17 opened with a 4 cents gap down on Tuesday, but it was able to hit a daily maximum at 4.96 euro during the day. An attempt to break above the 5.00 euro level, however, failed. In the last two hours of trading bears invaded the trading floor and pushed the price sharply lower. The benchmark contract fell to a daily minimum at 4.72 euro and was not able to recover by the time the market closed. It settled at 4.75 euro, a loss of 3.3% in a daily comparison. The traded volume of 18.3 million in the Dec17 contract was the highest since the last trading day of April (the compliance deadline). Despite the negative day, the MACD has been lifted above the zero line which is a bullish signal.
The benchmark carbon contract opened flat on Wednesday, and slipped just one cent down, before it started rallying towards 5 euro again. The price hit an intra-day maximum at 4.94 euro, and remained above 4.90 euro until the market closed (+3.2%).
Supported by the lack of auctions, EU carbon allowances rose for the 7th time in 8 days on Thursday, trading near the 1-month high reached earlier last week. After some initial hesitation, the price climbed continuously higher to hit the 5.00 euro level for the second time after Monday. Gains were kept until the last minutes of trade and the benchmark carbon contract closed at 4.98 euro, a gain of 1.4% in a daily comparison. The volume, however, was extremely low at 5.6 million compared to the 11-18 million in the three first trading days of the week due to a public holiday in many European countries.
After a strong opening the price did not hesitate long and it climbed to reach a new monthly high at 5.19 euro (last seen 7 April) on Friday. The price broke above the 200DMA at 5.08 euro as well. The contract settled at the daily maximum, with a gain of 19 cents or 4.2% from Thursday’s settlement price. 
In the last two weeks, when the price left the declining trend channel and the MACD climbed above the zero line, the technical picture got rosier. 
The two warning signals are, however, that the price trades above the upper Bollinger band and the relative strength index is approaching the overbought territory. 
In addition, auction supply increases by 29% in a weekly comparison and the dark spread also turned lower last week.
We therefore have a balanced view on the price and expect the EUA Dec17 to move between 4.70 and 5.45 euro this week.



Source: Bloomberg, ICE

Monday, May 22, 2017

EUA Dec17: Breaking out from the declining trend channel

With the exception of Monday, the benchmark carbon contract managed to increased every day last week. The rally lifted the price above the short term declining trend channel.
The benchmark carbon contract opened 2 cents above the previous Friday’s settlement price on Monday, but was only able to rise an additional 2 cents to a daily maximum at 4.50 euro. The price then spent most of the day around these levels before turning sharply lower in the last hour of trading. Sellers pushed the price down by 10 cents in the final 60 minutes to close at 4.39 euro, down 1.6% from Friday.
Supported by positive market mood in the morning, the EUA Dec17 opened 3 cents above Monday’s settlement price on Tuesday. Then it fell to 4.34 euro, but a strong auction helped the price breaking the resistance at 4.50 euro. After hitting a daily maximum at 4.57 euro, the price settled at 4.54 euro, a gain of 3.4% in a daily comparison. The price finished the day above the 20DMA and close to the higher edge of the short term declining trend channel.
On Wednesday, the EUA Dec17 opened with a 2 cents gap above Tuesday’s settlement price, but fell to a daily minimum at 4.49 euro in the morning hours. A healthy UK auction, higher power prices and the reversing oil price, however, helped the carbon price to turn higher as well. Buyers lifted the price above the Fibonacci level at 4.60 euro, but the 30DMA at 4.65 euro could not be broken. The benchmark carbon contract finished the day at 4.58 euro, a gain of 4 cents (0.9%). The price closed above April’s declining trend channel. In the last two trading days, when the price managed to increase, the traded volume rose above 10 million again which is a positive signal.
The benchmark carbon contract maintained its momentum and increased further on Thursday. The price opened with a gap up, which was closed in the morning hours already. Helped by higher oil and power prices, and the strong auction, the benchmark carbon contract increased step by step to reach a daily maximum at 4.82 euro, a level not seen since 20 April. Although the price retreated in the last minutes of trading, it closed with a gain of 3.9%. The price remained above the short term declining trend channel and it also closed above the 30DMA which is a positive sign.
Although the fast rally on the previous two days lifted the price above the upper Bollinger band which increased the likelihood of a correction (profit taking) on Friday, the EUA Dec17 continued rallying on Friday, hitting 4.92 euro and closing the day with a gain of 1.9%.
Last week’s rally improved the technical picture of the EUA Dec17 significantly, as the price broke from the short-term declining trend channel. The MACD approached the zero line, while the relative strength index (at 59) still leaves room for further appreciation.
The auctioned volume declines by 38% this week as there will be only three auctions due to public holidays in Germany. 
The lower auction supply coupled with the supportive energy mix (oil rallied on expectations the OPEC would extend and deepen the production reduction agreement this week, the German dark spread jumping above 2 EUR/MWh) will support the price of the EUA Dec17 this week. Should the price increase further, the first resistance is the 5.00 euro level, followed by the 200DMA at 5.08 euro.
On the other hand, the price jumped above the upper Bollinger band (at 4.85 euro) last week which increases the likelihood of a correction this week. In the case of a decline, the first support would be the 30DMA at 4.64 euro.
Volatility and traded volume might be impacted by the fact that the Innovate4Climate conference starts on Monday, 22 May. 

All in all, we expect the price to move between 4.50 and 5.20 euro this week.


Source: Bloomberg, ICE



Monday, May 15, 2017

EUA Dec17: Slipping lower slowly

Despite opening 2 cents above last Friday’s settlement price, the EUA Dec17 turned lower already Monday morning. The weak auction result and the low prices in the wider energy mix depressed the price further in the afternoon. By the end of the day the price fell to a daily minimum at 4.41 euro, and was not able to recover. The settlement price was just one cent higher and below last Friday’s minimum and the two last candles formed a bearish engulfing, a negative signal.
The benchmark carbon contract had one of its most boring days on Tuesday. At least, until the last hour of trading. The price moved in a narrow range of 5 cents until the final hour, when buyers hurried to lift the price to 4.58 euro and expand the daily range to 19 cents. The price settled 10 cents (+2.3%) above Monday’s closing price. The move surprised markets as the two previous candles formed a bearish engulfing. The traded volume, however, remained at the levels seen on Monday (below 10 million allowances).
The benchmark carbon contract seemed to continue the positive momentum Wednesday morning, but the steam has been lost during the day. The price opened 1 cent above Tuesday’s settlement price and hit a daily maximum at 4.57 euro, but could not climb any further. In the last hour of the trading session the price turned sharply lower and hit a daily minimum at 4.42 euro. The EUA Dec17 finished the day with a loss of 7 cents (-1.5% d/d).
Although the German dark spread approached its highest level in 2017, the EUA Dec17 was testing with its yearly minimum on Thursday. Despite opening with a gap up in the morning, the benchmark carbon price turned lower after the weak auction result. It fell to a daily minimum of 4.31 euro, just 1 cent above the 2017 minimum. The price finished the day at 4.35 euro, a loss of 2.2% in a daily comparison.
Thursday’s losses have been reversed on Friday. After opening at Thursday’s settlement price, the benchmark carbon contract turned lower pushed down by a weak auction result. It even hit a new 2017 low at 4.29 euro. In the afternoon, however, bulls took over the trading floor and lifted the price to a daily maximum at 4.47 euro. Gains were kept until the last minute of trading and the price closed 11 cents higher.
The technical indicators provide a neutral signal. The relative strength index is in the neutral territory, the MACD moves sideways below the zero line and the signal curve. The price slips lower every week, Although the change is not dramatic, the trend is downwards and the possibility of the price slipping to a new 2017 minimum cannot be ruled out.
In the five auctions this week supply will decline slightly by 2.7%, but it still remains a question who shows interest for the allowances. The cover ratio of Friday's German auction (1.43) was the lowest since 20 September 2016.
The discrepancy between the German dark spread and the CO2 price also raises questions about the upside potential of carbon. While the first one is approaching 2017 highs, the latter is hitting new 2017 minimums always every day.


 Source: Bloomberg, ICE

Monday, May 8, 2017

EUA Dec17: Macron and the improved dark spread to counterbalance the abundant supply

May's short first week started in a negative tone as the price hit a new 2017 minimum on Tuesday, on Wednesday and on Thursday as well, before turning higher again on the last trading day of the week.
The EUA Dec17 traded in a narrow range of 7 cents for most of Tuesday, but bears pushed the price to a new 2017 low in the afternoon. The price fell to 4.37 euro, 8 cents below the previous minimum. The traded volume got only close to 10 million when stop-loss orders were triggered at 4.45 euro.
Lack of demand pushed the price of the benchmark contract to a new 2017 low at 4.34 euro on Wednesday.
Despite hitting a new 2017 low at 4.30 euro in the morning hours, the EUA Dec17 climbed back above 4.50 euro late in the afternoon on Thursday. The strength was even more surprising as the German front year power traded near its intra-day minimum and the Brent plummeted by 5%. Although the contract was not able to keep all its gains, it closed above the 4.50 euro level representing an increase of 2.7% in a daily comparison.
The bulls took over the trading floor on Friday again. After opening at Thursday’s settlement price of 4.52 euro, the price hesitated a little in the morning hours and fell to an intra-day minimum at 4.45 euro. The strong German auction, however reversed the price direction and the contract reached quickly 4.70 euro. The contract was not able to maintain all its gains until the end of the session, but it still closed 6 cents above Thursday's settlement price.
Thanks to the rally since Thursday afternoon, the price approached the moving averages near 4.70 euro. Should the price be able to break these resistances, it would approach the upper end of the declining trend channel that has been established since the second week of April. 
The price could receive support this week from the EUphoria after the French presidential elections, where centrist and pro-EU Emmanuel Macron received more than 60% of the votes on Sunday. From the fundamental side, the improving dark spread could also attract some utilities to the carbon market this week.
On the other hand, the abundant supply might keep a cap on potential gains, as in five auctions more than 22 million allowances will be offered, an increase of 28% in a weekly comparison.
In a negative scenario, the new 2017 low at 4.30 euro will be the first strong support.
The technical indicators do not point into any direction. the relative strength index is comfortable in the neutral territory (at 45). The MACD is below the zero line and also below the signal curve. 



Source: Bloomberg, ICE

Tuesday, May 2, 2017

EUA Dec17: New 2017 low hit in the last week of compliance

Although the price fell to a daily minimum of 4.57 euro Monday morning, the positive market mood after the French elections lifted the benchmark carbon contract above the 2017 low (4.56 euro) hit the Friday before. A good auction helped the price reaching 4.74 euro during the day, the level from which the price started declining on Friday. The intra-day gains, however, could not be kept amid falling power prices and the price closed the day with a marginal gain of 1.5%, at 4.64 euro.
Low power prices and the high supply of allowances pushed the price of the EUA Dec17 to a new four month low on Tuesday. The price was stable in the first half of the day, but bears invaded the trading floor in the afternoon and pushed the price down to 4.45 euro. Almost 19 million allowances traded in the benchmark contract, meaning that the negative sentiment was confirmed by a high volume. (The average daily volume in April was 11.6 million.) By the end of the day the benchmark carbon contract could only return to 4.50 euro. The sell-off pushed the RSI close to oversold territory, the MACD below the signal curve and the price below the lower Bollinger band.
The EUA Dec17 consolidated above the 2017 minimum on Wednesday. The price opened at 4.54 euro, 4 cents above Tuesday’s settlement price, but the gap was closed quickly when the price fell to an intraday minimum at 4.47 euro. The afternoon brought buyers to the market resulting in an intra-day maximum of 4.65 euro. This was the level, the sharp decline started from on Tuesday. The price then closed 11 cents higher, a gain of 2.4%. The traded volume of 12.8 million allowances was in line with the April average, but remained below Tuesday’s 19 million.
Despite opening 2 cents below Wednesday’s settlement price, the benchmark carbon consolidated between 4.56 and 4.65 euro during most of Thursday’s session. In the last minutes of trading, however, sellers pushed the price down again. The closing price of 4.55 euro represented a loss of 6 cents or 1.3% from Wednesday. The traded volume fell further and did not reach even the 10 million.
The traded range narrowed further on Friday, when the price moved between 4.53 and 4.60 euro. The price stabilized in the middle of the range, to close unchanged in a weekly comparison.
Positive and negative factors impacting the carbon market might be in balance this week.
On the negative side, after the compliance deadline it might turn more difficult for the auctioned allowances to be absorbed. The auctions of last week had already a weaker result than those in the first half of April.
Oil and gas prices were falling hand in hand in the last week of April. Market got sceptical if an extension of the agreement between OPEC and non-OPEC countries can deliver higher oil prices if the countries not participating in the agreement (for example the US and Libya) increase their production levels. Gas prices followed oil lower, while demand was also dented by forecasts about milder temperatures.
Investors might also chose staying at the sidelines of the market before the second (and final) round of the French presidential elections, as the support for Mr. Macron declined slightly below 60% in the second half of last week.
On the other hand, the price trades close to the lower edge of the March-April range, next to the lower Bollinger band. This might result in a consolidation or correction of the price this week.
All in all, we remain neutral for this week and expect the price to trade between 4.00 and 5.00 euro.


Source: Bloomberg, ICE




Tuesday, April 18, 2017

EUA Dec17: Consolidation near the 5 euro level

In a short week before the Easter holidays, the EUA Dec17 gained 1.2%.

Thanks to a strong auction the price of the EUA Dec17 remained stable for most of Monday’s trading session. In the last 10 minutes of trading, however, the price turned sharply lower and finished the day one cent above its daily minimum, at 4.79 euro, with a loss of 10 cents from previous Friday’s settlement (-2.0% d/d).

Despite some intra-day volatility, the benchmark carbon contract remained within its comfort zone on Tuesday. After opening at Monday’s settlement, the price turned higher and reached 4.90 euro. The price then turned lower after noon. Reversing the pattern of the previous two days, bulls lifted the price in the last hour of trading to a new intra-day maximum at 4.92 euro. The closing price was just 5 cents below this level

The EUA Dec17 climbed higher step by step on Wednesday to hit an intra-day maximum at 5.04 euro in the afternoon. The benchmark carbon contract was not able to keep all its gains and finished below the 5.00 euro level. The closing price still represents a gain of 1.2% from Thursday’s settlement price. On the positive note, the price closed above the 20DMA.

In an Easter holiday mood, the benchmark carbon price moved in a narrow range of 11 cents on Thursday. The price opened at Wednesday’s settlement price and lost just one cent before climbing to an intra-day maximum at 5.03 euro. Gains however could not be kept by the end of trading and the price closed at 4.95 euro, a gain of 2 cents from Wednesday.

Technical indicators of the EUA Dec17 chart send a neutral signal. The relative strength index is in neutral territory (at 50). The MACD is approaching very slowly the zero line, but is still in the negative territory. The Bollinger bands narrowed, but the price closed at the mid band.

Although there is a slow increasing trend in the price since the last week of March, the price seems rather to consolidate between 4.60 and 5.30 euro. This range might keep the price this week as well.
 
 Source: Bloomberg, ICE