Natural Gas Prices Correcting Below $2.58: Inventory Build-Up Expected
Natural gas prices are currently experiencing a corrective move as they struggle to maintain levels above $2.58. This correction comes after a period of bullish momentum in the market. Investors are now eagerly awaiting the release of the weekly gas inventory data, which is expected to reveal a build-up of inventory by 119 billion cubic feet (bcf) for the week ending May 19, according to estimates from the United States Energy Information Administration (EIA).
US Dollar Index (DXY) Hits Two-Month High, Fueling Investor Anxiety
While natural gas prices undergo this corrective phase, the US Dollar Index (DXY) has reached a fresh two-month high, reaching 104.06. This surge in the index has amplified anxiety among investors, largely due to concerns over US debt-ceiling issues. As a result, market participants are closely monitoring the developments in the natural gas sector.
Bullish Hidden Divergence Fuels Natural Gas Price Rally
Despite the current correction, natural gas prices have recently resumed their upward journey, driven by a bullish Hidden Divergence observed on a four-hour scale. During this period, the asset formed a higher low while the Relative Strength Index (RSI) (14) formed a lower high. This divergence indicated that the momentum oscillator had become oversold within an uptrend, presenting a favorable buying opportunity for traders and investors.
Promising Indicators Point to Further Upside Potential
The presence of upward-sloping 50- and 200-period Exponential Moving Averages (EMAs) at $2.51 and $2.41 respectively suggests a positive outlook for natural gas prices. These indicators indicate that the market is likely to experience further upside momentum in the near future.
Key Levels to Watch for Natural Gas Futures
To gauge the strength of the ongoing rally, market participants will be closely monitoring the Relative Strength Index (RSI) (14) and its movement within the bullish range of 60.00-80.00. A break into this range would further strengthen natural gas futures, potentially propelling prices higher.
In terms of immediate resistance, a break above $2.60 would signal a bullish breakout, with natural gas bulls gaining momentum towards the May 22 high at $2.69, followed by the March 02 high at $2.88.
Conversely, if natural gas prices break below the support level at the May 17 low of $2.43, it could expose the asset to the April 20 low at $2.28. A further break below this level would lead the asset towards the May 05 low at $2.09.
H4 time frame chart
In conclusion, natural gas prices are currently undergoing a corrective move as they struggle to sustain levels above $2.58. The upcoming release of the weekly gas inventory data is anticipated to reveal a build-up of inventory, further impacting market dynamics. However, the recent bullish Hidden Divergence and promising indicators suggest the potential for further upside in the natural gas market. Traders and investors will be closely monitoring key levels and price movements to make informed decisions in this evolving landscape.