13/05/2024

April started with a short week, as the market remained closed on Easter Friday and Monday. Therefore, negotiations restarted on Tuesday, April 2nd. The weekly variation was negative, amounting to -1.97%, and the losses started occurring on April 2nd. The front-year contract moved as low as 56.90 €/tonne on April 3rd. The DEC24 EUAs recovered towards the end of the week and almost regained the opening levels, although not completely. The support at 55 €/tonne remained strong and was never tested during the examined period. Instead, the resistance moved upwards to 65.78 €/tonne, the volumetric high of March 26th. The market was in a lateral phase, with the prices of the front-year balancing around the 20-day moving average, approximately 59.80 €/tonne at the beginning of the month. The Commission’s publication of the verified emissions for 2023, which occurred at the beginning of April, did not particularly affect prices.

The second week of the month closed with a positive change in prices, which grew by 10.11% compared with Friday, April 5th. On Friday, the 12th, the DEC24 contract on the ICE exchange struck daily highs at 71.87 €/tonne, corresponding to the highest point since January 2024. Prices were now moving upwards, striking subsequently increasing highs. EUAs were strongly correlated with TTF prices: gas was also aggressively rising due to uncertainties in the Middle East and generalized worries regarding the latest war developments. The resistance at 65.78 €/tonne was definitely shattered, with a first area that could limit price gains found at 75.41 €/tonne (61.8% of Fibonacci) and then 81.25 €/tonne (volumetric high of January 2nd). On April 11th, the DEC24 EUAs returned to trade above the 100-day moving average, under which they had remained since October 13th, and were now pointing towards the 200-day moving average, at 76.53 €/tonne. The main technical indicators remained bullish both for the short and the medium term. However, the market was floating at the hyperbought threshold with an RSI at 70 points for a few days, so some retracement could soon be seen.

The opposite trend for the month’s third week: from the 15th to the 19th of April, the market turned bearish. From Friday, April 12th, the DEC24 contract lost 3.83%, with a trend inversion manifesting on Wednesday, April 17th. After reaching highs since January 8th at 74.90 €/tonne on Tuesday, the 16th, the front-year contract started decreasing again. These new highs aligned with a resistance that had previously been a support at the start of the year, around 75 €/tonne, before January’s bearish pull-down. It should be noted that the market slightly entered hyperbought on April 16th, and therefore, a retracement was plausible. A first area of support was found at 65 €/tonne, where the 20 and 100-day moving averages converged. The uncertainties in the Middle East and the TTF price were likely to continue influencing EUA volatility, so caution was required.

During the last week of the month, the exchange remained bearish, with the DEC24 losing 3.26% from Friday, April 19th. All weekly sessions highlighted a decrease in prices, and although on Thursday, the 25th, the market opened in a bullish mood (opening above previous closes), sessions concluded with a market that remained bearish. EUAs still felt the weight of TTF, also bearish. The support at 65 €/tonne area remained strong, and the resistance was very far away at 75 €/tonne. It was a lateral market phase, and many were questioning if in the upcoming months, considering the bearish fundamentals, we could be seeing prices close to 50 €/tonne again.

 

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Francesco Rogato
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With his commodity trading experience, specializing in the energy sector, and extensive knowledge of European exchange platforms and Over-The-Counter markets, he brings his advanced analytical view on the EU ETS carbon market in a monthly short blog, “Let’s Talk Carbon”.