Natural gas is trending lower in the short-term, as it forms a new descending channel on the 1-hour chart. Price just bounced off the bottom and is pulling up to the mid-channel area of interest.

This lines up with the 50% level around $3.650, which seems to be holding as resistance so far. A larger pullback could reach the 61.8% level at $3.670 or the channel top closer to $3.700. If any of these are able to keep gains in check, natural gas could slump back to the swing low at $3.565 or lower.

The 100 SMA is above the 200 SMA, though, so the path of least resistance is to the upside. In other words, there’s a chance for the channel top to be broken and for a reversal to follow. Price is also above the 100 SMA dynamic inflection point, so this could hold as support on dips.

Stochastic is moving sideways on middle ground to reflect consolidation while RSI is in the same boat. Natural gas price could stay in range until the next major catalyst.

The US NFP is up for release today, and a slightly stronger pace of hiring is eyed for June. However, leading indicators like the ISM manufacturing PMI and Markit industry PMIs are hinting at a likely downside surprise.

If that’s the case, commodities like natural gas could take advantage of risk-on flows, as traders price in lower odds of Fed tapering. After all, the central bank is waiting on stronger evidence of employment growth before deciding to adjust monetary policy.

On the other hand, a very strong upside surprise could bring risk aversion back in the game, as traders anticipate that the Fed might move up its timeline for scaling back stimulus. Note that natural gas is under a bit of downside pressure after the Department of Energy reported a larger build in stockpiles.