EUAs rose steadily on Monday as analysts suggested that carbon had broken out of its recent slump, but they gave several reasons why further gains could be limited.
The Dec-16 EUA contract settled up 15 cents at €5.33 on ICE after spending most of the day in positive territory, peaking a cent below Friday’s five-week high of €5.35.
Turnover was steady at 11.6 million, though well down on the previous session’s 17 million, when prices were volatile due to EU emission figures coming in slightly lower than expected.
Indicators from Monday’s EU auction were weak. The sale cleared at €5.08, some 5 cents below the secondary market, with a below average cover ratio of 1.81.
Auction supply climbs 24% this week to 17.3 million units across five sales following two four-sale weeks on either side of the Easter holiday period.
Bernadett Papp at brokers Vertis said technical signals, including closes above the Dec-16s’ 20- and 30-day moving averages, suggested prices could post further gains this week, but warned they could be capped by enlarged auction supply.
She pegged the nearest resistance level at €5.35, followed by €5.49, with the nearest support at the 30- and 20-day moving averages, both a few cents shy of €5.
Traders at Redshaw Advisers had a bullish weekly outlook, saying that speculators betting on a price rise and bolstered by widening clean dark spreads would attempt to push EUAs above €5.50 – a level not seen since early February.
The German calendar-year spreads widened by between 8-10% last week, but dipped slightly on Monday as higher carbon combined with a dip in power prices.
“We saw some signs of life from the [carbon] bulls last week although Friday’s Doji didn’t really add weight to the bull story. So still ‘in the mix’ for now, but the bulls may have a chance to mount an assault on [technical resistance at] €5.49 if they can keep [above] €5.00,” said Clive Lambert of technical analysts Futures Techs.
Analysts at Thomson Reuters Point Carbon gave a neutral weekly outlook, identifying bearishness in the energy complex, led by oil, and higher auction volume as negative factors.
By Ben Garside – email@example.com