- In Monday's trading session, natural gas markets displayed a modest rally, indicating an attempt to establish a support level within the overall range.
- Notably, the $2.00 level has proven to be a significant bottom on multiple occasions, suggesting that we may have witnessed the summer range's nadir.
- Consequently, it is highly likely that the market will continue to receive substantial support.
Upon examining the chart, we find that the 50-Day EMA hovers just above the $2.45 level, serving as a minor resistance barrier. A breakthrough at this point could potentially propel the market toward the $3.00 level, a psychologically significant threshold that commands attention and has already demonstrated resistance. Surpassing this level opens the possibility of a more significant upward movement, potentially extending to the 200-Day EMA. However, given the prevailing circumstances, such an occurrence appears highly unlikely. Summers typically witness subdued activity in the natural gas markets. Nevertheless, this year may deviate from the norm, as the conclusion of summer could prompt traders to focus on Europe and its natural gas storage replenishment prospects.
Traders Should be Vigilant
Considering that Russia will not be supplying natural gas this winter and given the European Union's experience during the previous winter, it is reasonable to anticipate increased demand for liquefied natural gas from the United States. As the summer progresses, I fully expect the market to gain momentum. However, until that time arrives, we are likely to experience predominantly sideways movement and increased volatility. Even if the market were to dip below the $2.00 level, the downside potential is currently limited.
Ultimately, the natural gas market shows promise of a potential rebound. Monday's rally suggests the establishment of a support level, with the $2.00 mark proving influential in multiple instances. While a breakout above the 50-Day EMA and the $2.45 level could fuel upward momentum toward the significant $3.00 level, a substantial move toward the 200-Day EMA appears unlikely in the present environment. Despite the natural gas market experiencing calmness during the summer, this year may deviate due to Europe's need to refill its natural gas storage. As the summer progresses, traders should closely monitor developments. Although we may encounter sideways movement and increased volatility in the near term, the market's downside potential is currently limited. Investors should keep a watchful eye on the horizon, as a potential surge in natural gas demand could bring about significant opportunities in the future.
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