- Natural Gas price retreats from the highest levels in five weeks, pares the biggest daily jump in seven months.
- Overbought RSI, 4.5-month-old horizontal area challenge XNG/USD bulls.
- 100-DMA, April’s top can restrict pullback moves, Natural Gas buyers remain hopeful beyond $2.50.
Natural Gas (XNG/USD) price remains mildly offered near $2.71 as it pares the biggest daily gains since October 2022 amid early Friday in Europe. In doing so, the energy instrument eases from a five-week high amid the overbought RSI (14) conditions.
However, the XNG/USD’s ability to stay beyond the 100-DMA support, around $2.64 by the press time, keeps the buyers hopeful.
Even if the Natural Gas price drops below $2.64 DMA support, April’s top surrounding $2.57 and multiple levels marked since March, close to $2.50, could challenge the commodity bears before giving them control. It should be noted that a two-week-old ascending support line near $2.51 acts as an extra filter towards the south.
In that case, a quick fall towards the early May’s swing high of near $2.39 can’t be ruled out.
On the flip side, a nearly four-month-old horizontal resistance area surrounding $2.75-80 appears a tough nut to crack for Natural Gas buyers.
Though, a daily closing beyond $2.80 won’t hesitate to prod the March month high of $3.08. That said, the $3.00 psychological magnet may act as an intermediate halt between $2.80 and $3.08.
Overall, the Natural Gas price remains on the bull’s radar despite the latest retreat.
Natural Gas Price: Daily chart
Trend: Further upside expected
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Natural Gas Price Analysis: Overbought RSI Prods XNG/USD Bulls Below $2.80 Key Hurdle
Natural gas prices experienced a slight pullback as the Relative Strength Index slipped below overbought levels. On the charts, Natural Gas/USD pair still holds ground above the $2.80 level of resistance, but could continue to decline if bulls fail to break that hurdle.
Since the start of 2021, the rebound in natural gas prices has been quite impressive due to a number of bullish catalysts. At the same time, the price action suggests that the rally could be running out of steam after achieving a three-month high at $2.90.
Earlier in the week, the XNG/USD pair climbed to a high of 2.9008 but has since pulled back slightly and appears to have formed a double top. In addition, the RSI slipping below 70 has weakened the bullish momentum and suggests the price could continue lower in the coming weeks.
Failure to break the $2.80 key hurdle could further weigh on prices and the XNG/USD pair could retest the 200-day simple moving average. On the downside, the first key support level is located at $2.750, followed by the $2.675 level. A break below this could see prices retesting the February low of $2.500.
From a fundamental perspective, the current bullish trend in natural gas prices is largely attributed to a decreasing supply-demand balance. The current decline in production has been accompanied by increasing demand from power plants that have seen increased demand for natural gas during the colder months.
However, price action could remain volatile in the short term as traders closely monitor the weather updates in order to determine the near-term impact on supply and demand. In the event of warmer weather, prices could experience a sharp decline and traders should adjust their positions accordingly.
In conclusion, the XNG/USD pair is holding its ground above $2.80, but the bears could retake partial control if the bulls fail to break out of this key resistance level. The technical outlook is favoring the bears, but a push higher could still take place depending on the weather forecasts. As such, traders should remain aware of the risks before making any investment decisions.