Natural gas bounced higher in the past trading sessions but remains in the middle of a downtrend on its 4-hour time frame. Price is hitting the resistance at the top of its descending channel and could resume the selloff soon.

Applying the Fibonacci extension tool shows the potential bearish targets. The 38.2% level is at $3.805 then the 50% level lines up with the mid-channel area of interest at $3.774.

Stronger bearish pressure could take it down to the 61.8% level at $3.744 or the 76.4% level near the channel bottom and $3.700 mark. the full extension is at $3.646.

Stochastic is already indicating overbought conditions or exhaustion among buyers, so turning lower would confirm a return in selling pressure.

The 100 SMA is above the 200 SMA for now, but the gap between the indicators is narrowing to reflect slowing bullish momentum. The 200 SMA is also holding as dynamic resistance as well.

Natural gas could be in for another leg lower, as the Department of Energy reported a larger than expected build in stockpiles. Analysts had been expecting to see an increase of 28 Bcf, but the report indicated a gain of 46 Bcf. This is close to the earlier increase of 49 Bcf, suggesting that demand may be peaking.

Weather agencies have been giving mixed forecasts for the upcoming weeks, likely signaling slowing purchases of the cooling commodity now that the summer season is drawing to a close. Supply remains elevated, so another gain in inventories might be reported next time.

Meanwhile, risk appetite also seems to be favoring the safe-haven US dollar. For one, the FOMC minutes hinted of a possible taper before the end of the year, leading to speculations that borrowing costs could also be increased soon after. Geopolitical risks are also keeping traders wary of riskier holdings like commodities.