Natural gas formed higher lows and higher highs inside a rising channel on the 4-hour time frame and is currently testing the mid-channel area of interest.

A break above this near-term resistance could set off a climb to the next upside targets. The Fibonacci extension tool shows that the 76.4% extension lines up with the channel top at $4.300, which could be a strong take-profit point. Sustained bullish momentum could take natural gas up to the full extension at $4.443.

The 100 SMA is above the 200 SMA to confirm that the path of least resistance is to the upside or that the uptrend is more likely to gain traction than to reverse. However, stochastic is turning lower after reaching the overbought zone, suggesting that sellers are taking over while buyers are taking a break.

Similarly RSI is already on the move down to reflect a return in selling pressure. This could lead to another dip to the channel bottom near the $4.000 handle and 100 SMA dynamic inflection point.

Natural gas could continue to enjoy upside momentum, as the latest inventory report from the Department of Energy confirmed stronger demand. Stockpiles rose by only 13 Bcf versus the estimated increase of 19 Bcf and the earlier gain of 36 Bcf.

Forecasts of warmer weather and reports of heatwaves could continue to keep purchases supported in the near-term, which would be bullish for the cooling commodity.

However, the upcoming NFP release might bring additional volatility across the board since this typically impacts market sentiment. Analysts are expecting a faster pace of hiring growth for July, which could revive Fed taper talks and spur speculations of an earlier end to stimulus.

On the other hand, weak data could ensure that borrowing costs would stay low for much longer, which is good for business activity and commodity demand.