Natural Gas drops on stronger US Dollar, gloomy demand outlook

• Natural Gas prices extend losses on Thursday after falling more than 3% on Wednesday. 
• Traders are selling Gas contracts with a stronger US Dollar killing off global economic recovery. 
• The US Dollar Index snaps March’s peak and rallies to test February’s highs. 

Natural Gas (XNG/USD) sank below $1.80 on Thursday after prices already slid by more than 3% on Wednesday. The move came in tandem with a stronger US Dollar after US Federal Reserve official Christopher Waller pushed back against the possibility of interest-rate cuts for June. This came as a cold shower to markets, which were counting on that June rate cut for a boost in the economy and thus a boost in demand. 

The DXY US Dollar Index jumped on the back of these comments to a fresh high for March. The 104.60 level, which was a line in the sand, was broken on Thursday ahead of US Gross Domestic Product’s final reading for Q4 and the Personal Consumption Expenditures Price Index (PCE) on Friday. 

Natural Gas is trading at $1.77 per MMBtu at the time of writing.  

Natural Gas news and market movers: Global demand drops

• A decline in China’s LNG inventories is becoming rather bad news for Gas prices, with Chinese buyers commenting to Bloomberg that they are awaiting a further decline in prices before considering refilling current drawdown levels.
• Japanese electricity generator Jera Co. is conducting planned outages at its gas-fueled plants in an effort to conserve liquefied natural gas after bad weather causes delays in LNG deliveries in the Tokyo Bay area. 
• ANZ Bank revised its outlook for European gas prices to a further uprising with ongoing attacks between Russia and Ukraine on gas storage facilities creating the ideal situation for an energy crunch. 
• The Energy Information Administration (EIA) will release around 14:30 GMT the weekly gas storage numbers. Previous was a build of 7 billion cubic feet, and a draw of 28 billion cubic feet is expected for this week. 
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Natural Gas Technical Analysis: Steps reversed

Natural Gas prices are taking a turn for the worse, sinking below $1.80 after a mixture of elements quickly made sentiment turn 180 degrees after the uprising on Tuesday. It was Fed’s Waller though who confirmed what markets were already thinking: those anticipated rate cuts are not going to come that quickly. This dampens hopes for a quick economic recovery and more growth potential, with thus demand being capped and even being revised to the downside. Further downside pressure is possible with the heating season ending and the summer lull in Gas markets ahead. 

On the upside, the key $1.97 level needs to be regained first, with the 55-day Simple Moving Average (SMA) coming in as well. The next key mark is the historic pivotal point at $2.13. Should Gas prices pop up in that region, a broad area opens up with the first cap at the red descending trend line near $2.21.

On the downside, multi-year lows are still nearby with $1.65 as the first line in the sand. This year’s low at $1.60 needs to be kept an eye on as well. Once a new low for the year is printed, traders should look at $1.53 as the next supportive area. 

Natural Gas: Daily Chart