Monday, January 16, 2017

EUA Dec17: Strong auctions kept the price near 5 euro

After the nosediving in the first days of the year, the strong result of the first auction of 2017 halted the decline of the price last Monday. The benchmark contract finished the day with a gain of 4.6%.
As the first auction results of the year did not disappoint market participants, the benchmark carbon contract found a good support at the 5.00 euro level and increased on two consecutive days. After opening at 5.28 euro on Tuesday, the price increased continuously during the day to hit an intra-day maximum of 5.71 euro. From here the price stabilized and finished the day with a gain of 0.24 euro or 4.5%.
After opening in line with Tuesday’s settlement price the benchmark carbon contract tested both the upside and downside on Wednesday. By the end of the day the price produced a doji candle indicating the indecision of the market participants, if there is further room for a price appreciation. The 20DMA stopped the rally.
The support level at the cross of the 200DMA, the 30DMA and a Fibonacci level was not enough to keep the price from falling on Thursday. The benchmark carbon contract slipped lower continuously during the day hitting an intra-day low at 5.04 euro. By the end of the day the price was not able to recover and closed just 1 cent above the daily minimum. The price cancelled almost all its weekly gains.
The benchmark carbon contract continued its downward trend on Friday, approaching the weekly minimum at 4.92 euro, but the strong German auction reversed the price movement. By the end of the day the EUA Dec17 recovered and closed in line with the settlement price of Thursday and the previous Friday.
The RSI did not leave the neutral territory, but the MACD slipped below zero (a bearish signal).
The main focus of the carbon market participants will be on the four auctions this week (offering more than 17 million allowances, but 5 million less than last week) and on the negotiations about the post-2020 reform of the EU ETS among member state representatives. 
In addition there will be couple of important events this week outside the carbon market, that might have an impact on markets in general and the carbon market might be no exception. 
British PM Theresa May is expected her "big Brexit speech" on Tuesday with the market expecting her more clarity about the terms and conditions the UK prefers when separating from the EU.
On the same day, the European Parliament elects its new president. Considering the conflict between the tow biggest political groups, the election of the new president might have an impact on the ETS legislation process as well.
And last, but not least the new US President will be inaugurated on Friday. Any indication about policy plans of the new administration might have an impact on the financial markets globally.
With the support level at 5.30 euro broken (the 200DMA, the 30DMA and a Fibonacci level being here), the technical picture of the EUA Dec17 chart got gloomier. The next support levels are last week's minimum at 4.92 euro, then at 4.60 euro (a local low from 16 December, when the Christmas rally started) and at the December minimum at 4.01 euro.
In a positive scenario, the former support at 5.30 euro will be the first resistance level.

 Source: Bloomberg L.P., ICE

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