EUA Dec17: Profit taking after trilogue

Vertis – The EUA Dec17 formed a doji candle last Monday, indicating uncertainty of the market participants before the key meeting of EU policy makers on Wednesday. By the end of the week the price lost more than 6% (after gaining almost 10% the previous week) and finished the trading at the 30DMA pushing the MACD below the signal curve (bearish).

The price opened with a 4 cents gap up Monday morning, but fell shortly to a daily minimum at 7.87 euro. The relatively strong auction result and the higher power prices helped the carbon market then in hitting a new daily high at 7.98 euro around noon time. In the afternoon, the price slipped back towards 7.90 euro and consolidated there with a low volatility. The benchmark carbon contract closed the day at 7.92 euro, with a gain of 6 cents or 0.5%. The traded volume decreased every day since 1 November. On that day it still reached 13.7 million allowances in the benchmark contract only, while last Monday only 10.4 million allowances traded.

Monday’s doji candle stopped previous week’s rally on Tuesday and the EUA Dec17 lost 1.9%. Traders were still optimistic in the morning when the price opened with a 4 cents gap up and hit a local high at 8.02 euro. The October high at 8.05 euro, however, could not be reached. The price started falling then after the weak auction and didn’t stop until 7.73 euro. The price was not really able to recover and closed the day at 7.75 euro, a loss of 17 cents or 2.1%. Tuesday’s intraday volatility was the highest since 19 October, as traders positioned themselves before the trilogue meeting.

On Wednesday, the EUA Dec17 continued its decline and hit a daily minimum at 7.60 euro. From the daily low the price turned higher again and climbed above 7.70 euro to close at 7.72 euro, down by 3 cents or 0.4%. The volume weighted average price was 7.68 euro, 7 cents below Tuesday’s settlement price. It was a signal that market participants turned cautious ahead of the trilogue that started just after the carbon market closed.

The news about the agreement on the reform of the EU ETS caused a 10 minutes euphoria in the carbon market on Thursday. Profit taking from the earlier rally and the weak energy mix pushed the EUA price lower during the day. Although the price fell shortly below the 20DMA, it recovered and finished the day above this key level.  The price closed at 7.55 euro, a loss of 17 cents or 2.2%.

On Friday, the EUA Dec17 opened with a 3 cents gap down from Thursday’s settlement. Although it was able to close the gap in the first hour of trading, the price turned sharply lower already before noon and hit a daily minimum at 7.37 euro. German power prices turning higher in the afternoon did not help the carbon market in recovering and the price closed at 7.40 euro. This way the benchmark carbon contract lost 2% in a daily comparison.

On a weekly basis, the price lost 6.1% after turning lower from the 8 euro level. The 20 and 30DMAs, however, proved good support levels until now.

The relative strength index is in neutral territory (50) failing to provide any clear direction to the price.

Source: Bloomberg and ICE

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