During the first week of July, quotations were yet again negative for EUAs, with the front-year contract which left on the ground 3.28% on a weekly basis. The DEC23 went back to trading below 86.00 €/tonne since June 27th, with a trend that remained bearish for almost the entire examined period. Prices decreased well below the 20 and 50-day moving averages and flattened themselves on the 200-day one, at the 86.20 €/tonne area: the average daily close was, in fact, equal to 86.50 €/tonne for the EUA DEC23. This tendency could have been connected to higher liquidity on auctions, which the previous week started to include the REPowerEU quantities, a framework instituted to distance the EU from Russian supply. At the horizon, however, there was a cut in auction volumes scheduled for August, which could again give some support to prices. A first level of support was represented by the 365-day moving average, which stopped the drops at the beginning of May and was at the 85.33 €/tonne area. The resistance remained far at 90 €.
Embarking on the second week of the month, the market still remained cautious and closed the week substantially unchanged: Friday, July 15th, marked -0.14% compared to Friday, July 7th, for the DEC23 EUAs, with an average daily close of 86.15 €/tonne. Volatility contracted and daily candles flattened, EUAs moved between the 365-day moving average and the 200-day moving average, waiting for a more decisive directionality. The previous year had seen a sharp price rise during the first half of August and a steady fall in the second half; the summer months were usually very volatile for EUAs. The 365-day moving average played as the main support for the DEC23 EUAs (around 85.22 €/tonne at the beginning of the week), while the 20-day moving average (slightly above 87 €/tonne) seemed to limit its gains.
From the 17th to the 21st of the month, the market returned bullish, preparing for August’s lack of offer (as previously mentioned, there was an auction suspension). The DEC23 EUAs gained +6.26% on a weekly basis, reaching the highest point in a month at 92.30 €/tonne on Friday, the 21st. Therefore, the breakthrough of the resistances at 87.00 €/tonne and 89.00 €/tonne was confirmed. The next obstacle for bullish breakouts was the volumetric high of June 20th at 95.40 €/tonne, and while the support area was more complicated to identify, one could be seen in proximity to the old resistance around the 20-day moving average (at that time around 87.70 €/tonne).
The last week of the month showed a sharp decrease in EUA DEC23 prices: -4.87% on a weekly basis. After the peaks seen the previous week, EUAs moved as low as 86.30 €/tonne, thereby breaking the previously mentioned support. During the last day of the month, EUAs crossed over (with a bearish movement) many of the most relevant moving averages (20, 50, 100, 200 days), creating a scenario of potential high volatility for the month of August.
Francesco Rogato
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”.