Natural gas continues to trend higher on its 1-hour time frame as it bounced off a rising trend line connecting the lows since the third week of May. Price could be ready to resume the climb to the next upside targets marked by the Fibonacci extension tool.
Price is already testing the 38.2% level but there could be more bullish pressure left for a test of the swing high at the 50% extension or $2.652. Stronger bullish momentum could take it up to the 61.8% level at $2.672 or the 78.2% level at the $2.700 major psychological level. The full extension is located at $2.734.
The 100 SMA is above the longer-term 200 SMA to indicate that the path of least resistance is to the upside or that the uptrend is more likely to gain traction than to reverse. However, the gap between the moving averages is narrowing to reflect weakening bullish momentum and a potential bearish crossover. If that happens, selling pressure could kick in and force a break of the trend line that lines up with the 200 SMA dynamic support.
RSI is still pointing up to reflect the presence of bullish pressure, and the oscillator has a bit more room to climb before reflecting overbought conditions. Stochastic is also heading higher to signal that buyers have the upper hand for now and could stay on until it reaches overbought levels.
Natural gas prices have managed to hold steady even as risk-off flows dominated financial markets for the most part of the previous week. Trade tensions are on the rise and would likely weigh on commodity demand, on top of the seasonal drop in consumption of heating commodities.
Nonetheless, fundamentals are looking bearish as production remains elevated amid the expected increase in temperatures in the coming weeks. Still, changes in forecast or milder temperatures might lead to short-term rallies for this commodity.