Week 21: Breach of technical support opens room to the downside

After a period of remarkable resilience, carbon came down this week, crashing through the 200-day moving average, a key technical support level, which has opened a wide room to the downside. We attribute the move mainly to weakening short-term gas prices that are pushing coal out of the fuel mix, and to this week’s return to full auction volumes. Fundamentals and technicals both suggest continued downward pressure for the week ahead. Adding the news of Germany being in recession, we see a clear bearish signal. On the bullish side, we see relatively weak auction volumes (no session on Monday or Wednesday) and an expected brief drop in French nuclear generation. These two elements might provide support, but overall, we have a bearish view of the week ahead.