Natural Gas gets oversold with tepid EU demand on the horizon

• Natural Gas hits a floor near $2.13 and risks more downside. 
• Traders see short-term demand not picking up with the EU as the biggest laggard. 
• The US Dollar Index remains steady above 103 ahead of ECB, US GDP and US PCE data. 

Natural Gas (XNG/USD) hits rock bottom again this Tuesday after a steep decline on Monday. Gas prices are hitting the floor again near $2.10 before another steep decline occurs. Despite being technically oversold, more of a downturn could be at hand with Gas exporters unable to ramp prices up while the demand-supply balance is still tilted into oversupply. 

Meanwhile, the US Dollar (USD) is hanging by a thread ahead of some main catalytic events that certainly will move the needle for the US Dollar. Although the US Dollar Index (DXY) is holding above 103, selling pressure is building with lower highs and lower lows on a daily chart. WIth the European Central Bank rate decision, US Gross Domestic Product on Thursday and US Personal Consumption Expenditures on Friday, the DXY is set to enter serious volatility later this week. 

Natural Gas is trading at $2.13 per MMBtu at the time of writing.  

Natural Gas market movers: European demand puts Russia in tight spot

• Sluggish economic demand and mild temperatures are putting Europe’s reserves in good condition to withstand further demand. 
• Chinese economic uncertainties are seeing Chinese demand not really hitting elevated levels. 
• Russian LNG exporters are trying to jack up prices. Bloomberg reports that Sakhalin Energy in the Far East is trying to renegotiate contracts with Asian partners at a higher price.
• Near 15:00 GMT the Richmond Fed Manufacturing Index for January is due to be released. Previous number was at -11 with -7 expected. A further contraction could mean less demand for LNG for the US markets with economic activity slowing down.  

Natural Gas Technical Analysis: Oversold though not yet to buy

Natural Gas has hit rock bottom and is signalling it is oversold on the Relative Strength Index on a daily chart. Though this does not yet mean traders will buy blindly into the commodity. With economic outlooks for especially Europe being very much depressed, it does not look to be the right time just yet to start buying, as demand does  not look like it will pick up first. 

On the upside, Natural Gas is facing quite some pivotal levels to get back to. First is the low of December 13th at $2.20 which already acts as a first line in the sand. Next is the intermediary level near $2.48. Once that area gets hit, expect to see a test near $2.57 at the purple line.

A break below the yellow line at $2.10 means big issues for Natural Gas, with a fresh multi-year low. First level to look for on the downside is near $1.51, the low of June 2021. Further pre-Ukraine levels would come in sight as well with $1 up for grabs in the longer-term

XNG/USD (Daily Chart)