Monday, January 30, 2017

EUA Dec17: Last hour sell of pushed price back below 5 euro

The benchmark carbon contract had a relaxed start to last week. It traded between the support level at 5.30 euro and the resistance level at 5.60 euro on Monday.
After opening at 5.33 euro (the highest level of the day), the EUA Dec17 declined continuously to hit an intra-day minimum of 5.13 euro on Tuesday. The price was not able to recover by the end of the day and closed at 5.09 euro, a loss of 26 cents.
The EUA Dec17 was hesitating around 5 euro on Wednesday, but due to the high auction supply, the weak energy mix and the unchanged phase 3 free allocation, it closed below this level. Milder temperatures and  lower power prices continued to weigh on the price. As a consequence, the price finished the day 2 cents below the 5 euro mark.
Wednesday’s close below 5 euro invited buyers to the market and the EUA Dec17 climbed continuously higher on Thursday. The rally accelerated after the strong auction. The price hit an intra-day maximum of 5.25 euro and finished the day with a gain of 4.4%. The candle of the last 10 minutes suggested, however, that there might be traders on Friday taking the profit from their long positions due to the proximity of the resistance level at 5.30 euro.
The price remained stable for most of the day on Friday, but lost steam in the last hour of trading and turned back below 5 euro. The price closed just one cent above the weekly minimum at 4.91 euro which meant a weekly loss of 9.4%. 
With temperatures below seasonal average and the compliance season starting, the price found a support around 5 euro in the last week. On the other hand a strong resistance at 5.30 euro (20 and 200DMAs, Fibonacci level) limited the price appreciation and from this week on milder temperatures are expected. 
From a more distant perspective the price is moving sideways in a range between 4.60 and 5.60 euro since the second week of January. The number of black and white candles also suggests that the market is balanced (many market participants are well covered for 2016). 
The relative strength index (RSI) is in neutral territory (44) and the MACD is moving sideways below the zero line. The 20DMA, however, fell below the 30 and 200DMAs providing a bearish signal and increasing the chances for the price to trade rather near the lower edge of its comfort zone.
The first important event that could move the price out of this comfort zone will be the vote in the plenary of the European Parliament about the reform of the EU ETS 15 February. We might see prices moving sideways in the above range (4.60-5.60 euro) until then.

Source: Bloomberg, ICE


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