Natural gas continues to trend higher but might be in for a quick pullback on its rally. Price is dipping to the 38.2% level, which might draw more buying pressure.

A larger pullback could reach the 50% level that lines up with the rising trend line on the hourly time frame or the 61.8% Fib at the $8.414 level and 100 SMA dynamic support. If any of the Fibonacci retracement levels hold as support, natural gas could resume the climb to the swing high at $9.562 or higher.

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. Stochastic is also pulling higher after reaching the oversold region, suggesting that sellers are taking a break and that buyers are taking over.

RSI, on the other hand, has more room to head south, so price could still follow suit. Stronger selling pressure might even spur a break below the short-term trend line and a reversal from the climb.

This could all boil down to the upcoming FOMC statement and its impact on market sentiment. Many are expecting the Fed to hike rates by 0.75% in order to keep inflation in check but at the same time avoid any disruptions to business and consumer activity.

A larger interest rate hike could mean more upside for the US dollar, thereby leading to a decline for commodities. However, many are expecting a dovish hike that could send the US currency lower. In that case, risk appetite might be able to prop up natural gas prices.

The inventory report from the Department of Energy would likely influence natural gas prices as well, as another draw in stockpiles would reflect strengthening demand.