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