Natural gas markets have initially tried to rally during the trading session on Thursday as we are starting to roll over into the May contract. At this point, we are forming a second shooting star in a row, generally a very negative sign.
Natural gas markets have initially tried to rally during the trading session on Thursday but gave back gains near the $5.20 level as the May contract now becomes the forward month. At this point, we are going to continue to run into a bit of hesitation at this extreme level and I would anticipate a pullback. The $5.00 level will be a trigger for more selling, as a large option being abandoned would possibly accelerate the downside.
Warmer temperatures are coming and that will drive down the value of natural gas overall. Ultimately, this is a market that has gotten a bit stretched and will more likely than not pull back to reach lower levels. Ultimately, I think we need to continue to see a range form, and then a gradual flush as the markets have become a bit too hot for this time of year.
Alternately, if we were to break above the $5.50 level in the May contract, that will drive everything much higher. Ultimately, that is a tall order, especially after the price action that we had seen during the trading session on Thursday. The US dollar has a certain amount of influence, as does the overall commodities rally, but it should not be forgotten that natural gas is abundant in the United States, and until the US starts to be a major exporter of LNG, the rest of the world only matters a bit. I think we are setting up for a short-term pullback.
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Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.