Natural gas price outlook: downside momentum fading with falling wedge in focus

Is Momentum Fading?

Natural gas prices extended lower this past week, marking a 3rd consecutive losing streak. This is not something out of the ordinary for the heating commodity as of late, with consistent losses occurring since the summer of 2022. But a closer look reveals that positive RSI divergence is starting to emerge in this timeframe. As in, prices are looking at setting new lows, but the indicator is not.

This is a sign of fading downside momentum, which can at times precede a turn higher.

Natural gas weekly chart

Eyes on the February Low

On the daily chart, prices are sitting just above the February low at 1.967. This price also represents the current 2023 low, as well as the weakest point since September 2020. Much like with the weekly setting, this timeframe also displays positive RSI divergence.

In the event of a turn higher, the 50-day Simple Moving Average (SMA) could hold as immediate resistance, maintaining the downside focus. Otherwise, extending gains places the focus on the March 3rd high at 3.027. Meanwhile, breaking under support exposes the 23.6% Fibonacci extension at 1.696 toward the 2020 bottom at 1.44.

Natural gas daily chart

Falling wedge continues growing

Zooming in further on the four-hour view, the Falling Wedge outlined earlier this month continues brewing. So long as natural gas remains within the confines of this pattern, the near-term outlook remains bearish. But, an upside breakout would open the door to a bullish reversal. That would place the focus on the 100-period SMA, which may hold as resistance.

Natural gas four-hour chart

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.