XNGUSD Enters an Uptrend on Broad SupportNatural gas price (XNGUSD) has resumed an uptrend, supported by both short- and long-term factors.
Fundamental Analysis
1. Natural gas prices recently rose as high temperatures in Texas and the southern US increased air-conditioning demand, forcing power plants to consume more natural gas. Lower wind-power generation during some periods further strengthened gas demand from the electricity sector.
2. EIA data showed inventories rose by only 32 Bcf in the week ending 17 July, near the low end of expectations at 34 Bcf. This indicated stronger gas demand, eased surplus concerns and prompted some short covering.
3. Long-term support also comes from risks to Middle Eastern LNG supplies, especially uncertainty over shipments through the Strait of Hormuz, encouraging Europe and Asia to diversify imports towards the US.
4. However, high production and excess inventories remain risks. Lower 48 output is near a record at 110.3 Bcf per day, while inventories remain around 6% above the five-year average.
Technical Analysis
5. After consolidating within a wedge continuation pattern for some time, XNGUSD broke above the pattern’s upper boundary, signalling a potential bullish continuation.
6. Before the bullish breakout, the price had consistently formed higher swings, indicating an uptrend, which was further confirmed by a golden cross between the EMAs.
7. If the price breaks above the previous high at 917, the next target may be the 61.8% Fibonacci Extension at 945.
8. However, if the breakout fails and the price returns to the bearish range, it could signal a long-term bearish reversal.
Analysis by: Krisada Yoonaisil, Financial Markets Strategist at Exness
Long
