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

Monday, April 10, 2017

EUA Dec17: Technical indicators provide mixed signals

The EUA Dec17 had a positive start to the week on Monday. It opened 6 cents above the previous Friday’s settlement price, but retreated before the publication of the 2016 verified emissions data. As the data suggested at first sight that the emissions increased from 2015, the price jumped to a daily maximum of 4.91 euro. Later on, however, the market realized that there was a French installation that most probably reported erroneous data without which emissions declined by the expected extent. As a consequence, the price turned lower and consolidated around the 4.75 level in the afternoon, but bulls lifted the price higher in the last hour of trading again. As a consequence, the EUA Dec17 finished at 4.87 euro (+3.8%).
The EUA Dec17 traded in a 10 cents range during most of Tuesday, but the last hour of trading woke up bears, who pushed the price down to 4.66 euro. The price closed at the lower edge of the daily range, at 4.65 euro, a loss of 4.7%. This way all the gains from Monday afternoon have been cancelled and the price got close to the support level at 4.60 euro.
The EUA Dec17 opened with an 8 cents gap up from Tuesday’s settlement price, but filled in the gap quickly, in the first hour of trading already. Higher power and oil prices, and a strong UK auction lifted the price to a daily maximum at 4.93 euro. Profit taking started in the last hour of trading and pushed the price back to 4.82 euro.
A strong energy mix, compliance purchases and short covering lifted the benchmark carbon contract on Thursday. After opening at 4.82 euro in the morning, the price climbed continuously higher during the day. The break of the resistance level at 4.95 euro accelerated the price appreciation, as many traders closed their short positions. The price climbed above the 20DMA and hit a daily maximum of 5.14 euro, a level last seen 20 March. The rally was halted by the 200 and 30DMAs. By the end of the day the EUA Dec17 gave back some of its gains, but it still managed to close above 5 euro, and finish 5% above Wednesday’s settlement price. The rally lifted the MACD above the signal curve, which is a positive signal. In addition the price rose above the declining trend line of March.
In the first half of Friday, the EUA Dec17 hit a new local high at 5.19 euro, but shortly later profit taking started which accelerated towards the end of the day pushing down the market to 4.87 euro. The price finished at the lower edge of the intra-day range, at 4.89 euro and fell back below key levels like the 5 euro level and the 20DMA.
Despite the sell-off Friday afternoon, the price closed 4.3% higher in a weekly comparison.

The technical indicators provide mixed signals for this week. The relative strength index is in neutral territory (48). The MACD is below zero, but due to the rally last Wednesday and Thursday, it has been lifted above the signal curve which can be considered as a positive sign. 
On the other hand, the fact that the price was not able to remain above 5 euro and fell below the 20DMA last Friday put question marks to the strength of the price. In addition, the 30DMA fell below the 200DMA, also a negative signal.

Compliance demand and the lack of the German auction on Friday (Good Friday is a bank holiday) might provide stability to the CO2 price this week, but low electricity demand due to the holiday season can put a cap on potential gains. 

We therefore expect the price to consolidate in the range of 4.60 (March low and lower Bollinger band) and 5.30 (a Fibonacci level) euro this week.

Source: Bloomberg, ICE

Monday, April 3, 2017

EUA Dec17: 4.60 euro was key support before the publication of the verified emissions data

The benchmark carbon contract finished last week 1.7% lower as traders took profit before the publication of the 2016 verified emissions data and cancelled three days of gains. The relative strength index has been pushed below 40 and the MACD deeper into negative territory.
On the first trading day of the last week, the EUA Dec17 extended its losses and hit a new 2017 low at 4.58 euro. The price fell below the previous 2017 minimum at 4.62 euro during the day, but managed to climb back one cent above this level by the end of the day. The decline pushed the MACD deeper into the negative territory, and the RSI close to 30.
The benchmark carbon contract started on Tuesday at 4.62 euro and increased continuously during the day. It hit a daily maximum at 4.82 euro, but fell back in the afternoon to close at 4.74 euro (+11 cents of 2.4%).
The carbon market received positive signals Wednesday morning, but there were significant risk factors (Brexit, Polish auction) that made traders cautious in the morning. After the surprisingly strong Polish auction, however, the price rallied to the resistance level at 4.84 euro, but it was not able to maintain its gains until the market closed. As a consequence, the EUA Dec17 closed flat to Tuesday’s settlement.
The 5 cents gap from Thursday morning was quickly filled as the price fell from the 4.81 euro opening price to a daily minimum of 4.64 euro. A strong energy mix, a revised US GDP and short covering made the price rally in the afternoon to 4.98 euro, a level last seen a week ago. The price closed at 4.92 euro, a gain of 3.4%, but the 20DMA fell below the 200DMA which is a bearish signal.
The benchmark carbon contract was relatively stable almost the whole Friday long (trading between 4.91 and 4.95 euro), but bears invaded the trading floor in the last hour of trading to reduce their positions before the publication of the 2016 verified emissions data on Monday. The price fell steeply 4.86 euro to a daily minimum of 4.67 euro.
The direction the EUA Dec17 will take this week will be defined by the 2016 verified emissions data. If emissions declined more than expected by the market (a decline of 2-4% from 2015 levels), the price might fall below the support level at 4.60 euro. If emissions only fell by a smaller extent than the linear reduction factor of 1.74%, it means that the oversupply did not increase further. This might support the price and pull it towards 5 euro.

Source: Bloomberg, ICE