At the beginning of May, EUA prices seemed to struggle to find a direction, and from the 1st to the 5th, the overall weekly change was -0.58%. However, starting from the second week, the front-year EUAs were confirmed as bullish and struck a +4.14% compared to Friday, May 5th. DEC23 moved upwards for almost the whole week, but towards the end, quotations relaxed their run and consolidated slightly below 90 €/t, with a trading range that spanned from the lows at 84.50 €/t (08/05) to highs at 90.12 €/t (11/05). EUAs entered a period of consolidation and therefore halted the bear phase. A resistance area was found around 90 €/t, followed by the threshold at 92 €/t. At the same time, the support remained in proximity to the 200 and 365-day moving averages and at the €85 level. The monthly volumes remained weak, with an average of 16 million EUAs traded daily, signaling that market operators had lost some interest since the compliance year had just ended.
The third week was again positive for EUA prices, which didn’t halt their bull run but slowed down, striking an overall +1.58% since Friday, May 12th. The DEC23 EUAs traded again above 91 €/t during Friday’s session after starting from the lows at 86.97 €/t last Monday. The DEC23 prices were “trapped” between two pairs of aligned moving averages: the support was confirmed at the 85.50 €/t area (200 and 365 days), while resistance was forming around 90 € (50 and 100 days). The volumes remained “weak,” signaling that there was still a lack of interest from operators after the closure of the compliance cycle.
Prices started to collapse from May 22nd until the end of the month. The decreasing EUAs were positioned at 4-month lows and reached the lowest point since January 25th, when the DEC23 EUAs dropped to 81.92 €/t on Friday, May 26th. The movement can be traced back to technical reasons and the open interest on the DEC23 contract (the indicator for the number of open positions in the future) returning to the lowest levels of last January, signaling the closing of positions for almost 30 million allowances during that time. Since several supports were broken, the most important being in proximity to the 200 and 365-day moving averages (around 85.50 €/t), EUAs now have space to descend well below 80 €/t and until 76.80 €/t, support onto which the DEC23 EUAs bounced for the whole first half of January. However, the market is approaching a hypersold area with an RSI at 34 points and a CCI which has already been hypersold since May 24th (-141 points). The old support at 85.50 €/t seems to have become the new resistance (bearish pullback).
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”.