Last week’s breakout may be followed by some consolidation with holidays likely to limit trading for Monday and Tuesday for much of Europe.The price increase looks like it may have been largely technical in nature, with financial players that were betting on further price losses forced to buy back in as prices breached key technical resistance levels. We can however identify some bullish fundamentals that could mean EUAs will stay supported and could go higher in short term, though much of the bullishness & positivity seems to rely on mild weather continuing through winter. Monday’s subdued trading gives pause for thought but nonetheless we take a bullish outlook this week.

  • 9.4 million EUAs are to be sold at auction this week. 
  • Short squeeze the technical driver behind the price increase? The ICE Commitment of Traders data released this week should show whether short positions held by financial players have been flushed out by the sudden price increase through €69.50 and €72.50.
  • Bullish fundamental factors:
    • REPower EU – no new unexpected volumes of EUAs from the MSR are likely to come to market given the European Parliament’s and Council’s positions that REPower should be funded from front-loading of EUA auctions that were scheduled for later in the year. Given the MSR will see the front-loaded sales of EUAs as additional supply in the short-term, long term this should have a bullish impact.
    • Ammonia, fertilizer production starts to recover: 45-50% of European ammonia production is still down, compared with almost 70% in September – according to ICIS figures. The lower gas prices are encouraging production to resume, with subsequent EUA demand.
    • EU ETS remains short on a yearly basis: EUA prices are likely to remain high as the market is about 346 million EUAs short this year and forecast to be 242.5 million short in 2023. Gas is still quite expensive – and EUAs at present would still need to hit a price in excess of 300 Euros to price natural gas fired power ahead of coal fired power generation.
    • Weather outlook looks mild: a mild winter could leave German gas storage about half full by the end of winter. A colder than average winter could see gas stores run out by the end of winter. Signs are positive for now for a mild winter and with substantial LNG deliveries queueing up and strong Norwegian supplies, but much does depend on potentially unreliable weather forecasts. November will be a better judge for temperatures.
    • Power price controls could boost electricity demand: controls on power prices could mean more consumption, more forward power sales and therefore more hedging activity.
  • Bearish factors?
    • The EU last week saw a draft ‘non-paper’ detailing controls on power prices would subsidise gas prices down to a target level of €100-120/MWh. Gas demand should rise on that basis, while this could bring ‘artificial’ fuel switching into the mix. Favouring gas fired power over coal fired power would be bearish for EUAs and without further intervention could draw on Europe’s gas reserves, upsetting the positive picture we currently have.
    • Maintenance can resume on French nuclear facilities: a ramp up to nuclear generation should displace some fossil fuel generation.
  • Economic downturn? Eurozone PMI is contracting for the fourth consecutive quarter in October, while France, Italy and Spain are all showing weak economic fundamentals.
  • Technicals: after a 6 day rally in the EUA market, the MACD has turned positive, meaning that the short term average is above the longer term average. This also suggests that traders may want to refrain from taking short positions. On the daily chart the RSI is around €55 meaning that there could be more upside potential.
  • The 44-day MA is at €70.37, the 100-day MA at €78.34 and the 200-day MA at €80.71. At the same time the YTD average is €81.12. Currently we are trading at this level and given the positive momentum in the market, we might expect to trade higher in the next few days.
  • The previous downtrend channel shows a Higher Low at €82.50-83, which is where the price dropped and showed resistance. Any break above that level might signal a bullish buying appetite. The main support sits at €75.80, which is quite far off for now.
  • Monday could combine with Friday’s candle into a bearish engulfing candlestick pattern – some downside or consolidation on the way?

Key Technical Levels:


R1: 82.50

R2: 87.90

R3: 90 (psychological level)


S1: 75.80

S2: 74.50 (Back to Bearish momentum – point break)

S3: 73.83 (Strong Support)

S4: 70 (Psychological level)

Outlook: neutral

  • Indicative EUA Price: €79.50
  • YTD Average EUA Price: €81.12
  • MTD average EUA Price: €77.19



1 – Dec22 EUA price chart

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