EUA Dec20 up 26% in June
The benchmark carbon contract hit a new nine-month high at 27.23 euro in June and gained more than 5 euro during the month.
The EUA Dec20 jumped by 85.7% from the 14.35 euro low hit in March when the coronavirus hit Europe. Since then, the price moved in an increasing trend channel that has been widened by the high volatility of the market.
Source: Bloomberg, ICE
In the last three months, the 20 and 30-day moving averages provided a good support to the contract. After three tests, the price also managed to break above the 200-day moving average in June. The 200DMA, currently at 23.17 euro will work as a strong support in the next months.
To confirm the bullish signal provided by the moving averages, end of June the 20-day moving average first crossed the 30DMA in the beginning of June and then the 200DMA at the end of the month. The MACD climbed into positive territory in May.
By the end of the first semester, the benchmark carbon contract became overbought. On 30 June, the price settled above the upper Bollinger band and the relative strength index was above 70 for several days. This could imply that either the market consolidates at current levels or it starts a correction.
Out of the last seven years there was only one year, 2016, after the Brexit referendum when the carbon market posted losses in July. With August offering 50% less allowances in auctions, many market participants bring their purchases forward and by doing so they lift the carbon price already in July.
If the rally continues, the price has to face resistance levels at local highs from last year at 27.56 euro (September) and 30.34 euro (July). In the case of a correction, a consolidation between 23.00 and 26.00 euro seems realistic, as we saw it in autumn and winter.