Prices experienced a sensible loss before June 2nd, with the DEC23 EUAs remaining on the ground 4.02% from Friday, May 26th. The market was in a quite bearish phase that had started on May 22nd and had almost exclusively seen bearish sessions. This caused the downward turn of all the main technical indicators, but some indicators were signaling the hypersold area into which the permit had entered. This could have forecasted an imminent bounce in prices. During the month of May, the DEC23 future lost almost 10%, and it was in proximity to the yearly lows. Volumes were rising, signaling the return of interest from market operators. It was still sensibly below all the main moving averages and approximately 7 €/t below the one at 365 days.
During the second week of June, the market returned positive, with the DEC23 EUAs earning 9.87% on a weekly basis and once again trading above 87 €/t during the session of June 9th. After reaching the weekly lows at 78.01 €/t at the beginning of the first week, the front-year contract gained almost 10 € and broke through several resistances. The most important resistance, which laid around the area of convergence of the 20, 200, and 365-day moving averages, was surpassed on the 9th after a first attempt the previous day. The circumstance seemed to be mainly due to the covering of short positions by market operators, who rebought what they had previously sold, thereby sustaining demand and prices. The first resistance now was around 90 €/t, which had limited bullish breakout for two weeks in mid-May.
The third week of the month saw racing prices: from the 12th to the 16th of the month, the front-year contract experienced a +6.41% increase compared to Friday, June 6th. Daily highs at 95.25 €/t were reached during Thursday’s session, and after the very bullish first part of the week, quotations ‘relaxed’ towards the end of the period. New highs since April 18th were reached, and prices were sustained by increased daily liquidity (an average of almost 30 million EUAs traded daily on DEC23). The previously mentioned volumetric high became the new resistance to prices, while the support could be identified in the 100-day moving average, below which prices never went since Wednesday, June 5th (around 90.50).
From the 19th to the 23rd of the month, prices turned negative: EUAs remained on the ground 4.84% compared to Friday, June 16th. EUA DEC23 prices decreased until they reached lows at 87.55 €/t during the session of the 23rd, after opening the week with peaks at 96 €/t on Tuesday, June 20th. The circumstance was most likely due to the closing of short positions by market operators, as reported by ICE on trader’s operativity. It was the biggest drop in the latest months, with EUAs remaining on the ground 4.30 €/t in a single session on Wednesday, 21st.
During the last week of June, prices were quite stable for EUAs, and the DEC23 future gained 1.37% on a weekly basis. The previous week’s highs weren’t surpassed (over 90 €), but peaks at 89.61 €/t were still reached during the session of Friday, June 30th. The front-year contract alternated between bullish and bearish sessions, basically flatlining. Volumes were also contracted, with a weekly average of 18 million EUAs traded daily, almost 19% below June’s daily average.
EUAs remained aligned with the 20-day moving average, leading to the assumption that the market remained in an accumulation phase, and slightly below the 50-day moving average, which seemed to be a first support to prices (at 86.84 €/t). The area around 90.50 €/t continued to confirm itself as the main resistance to bullish breakouts. An eventual breakthrough and consolidation around the 92 € area could reactivate the bullish trend and bring EUAs to yet again test the historical highs above 100 €/t.
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”.