Natural gas is trending higher with its higher lows and higher highs inside an ascending channel on its 4-hour chart. Price has broken below the mid-channel area of interest, so it’s due for a larger pullback to the channel bottom closer to the 50% Fib.
This is around the $2.389 level and a larger retracement could find support at the 61.8% Fib near the 200 SMA dynamic inflection point. On the subject of moving averages, the 100 SMA is still above the longer-term 200 SMA to indicate that the path of least resistance is to the upside. In other words, the uptrend is more likely to gain traction than to reverse.
RSI is treading lower to signal that there’s still some selling pressure in play. Stochastic is also heading lower to signal that selling pressure is present but the oscillator is already dipping into the oversold region to signal exhaustion. Turning higher could mean that buyers are ready to return. In that case, price could recover to the swing high at $2.500 or the channel top closer to $2.550.
Risk appetite seems to be slowing as traders are getting wind of weaker US earnings figures, likely weighed down by trade tensions with China. Still, the improved trade situation could keep business sentiment supported and allow the uptrend to resume sooner or later.
Traders are likely to pay closer attention to inventory data this week as warmer weather conditions in the US likely dampened demand. Whether or not producers have been able to adjust output enough remains to be seen.
Also it’s worth noting that the slightly more dovish tone of the FOMC minutes and Fed head Powell himself could also keep risk sentiment supported as lower borrowing costs likely keep business outlook more positive, thereby supporting demand for commodities.