The natural gas market continues to exhibit significant volatility, although it is currently attempting to recover from extreme lows. Whether this recovery can be sustained over an extended period remains uncertain. However, it appears that the market is gradually settling into a summer range. In this context, we can anticipate limited upside potential, with the 50-Day Exponential Moving Average (EMA) likely to act as a barrier. A breakthrough above the 50-Day EMA could drive the market toward the $2.50 level and potentially as high as $3.00. It is important to note that the $3.00 level is likely to mark the upper boundary of the summer range and surpassing it would require significant heat waves or other substantial catalysts.
It is highly probable that there will be future opportunities to short this market, as natural gas demand may be somewhat diminished due to warmer temperatures and reduced concerns about European demand. However, we must closely monitor European demand, as the absence of Russian gas in the supply chain later this year could lead to significant challenges in fueling the European Union. This situation is expected to increase the importance of exports from the United States, potentially resulting in explosive movements in the natural gas market. In such an environment, we anticipate that natural gas will present excellent trading opportunities on the upside. However, this scenario is more likely to unfold later this year, rather than now.
There May Be Opportunities to Short the Market
- In the meantime, it is advisable to consider selling signs of exhaustion to capitalize on the overall downtrend in natural gas.
- Consequently, it is reasonable to expect that the $2.00 level will likely be tested again.
- If a breakdown occurs below that level, the market could potentially target the $1.80 level over the next few weeks.
- However, it is unlikely that the market will decline significantly beyond this point soon.
At the end of the day, the natural gas market demonstrates ongoing volatility and is in the process of recovering from extreme lows. A summer range is likely to emerge, with limited upside potential. The 50-Day EMA is expected to act as a resistance level. While there may be opportunities to short the market, future considerations regarding European demand and the absence of Russian gas are crucial. Natural gas may present explosive upside potential later this year. Currently, selling signs of exhaustion to take advantage of the downtrend is a viable approach, with the $2.00 level likely to be tested again. Further decline towards the $1.80 level is possible but not expected to occur significantly in the near term.
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