Natural gas prices have experienced a sharp decline over the past week, falling more than 15 percent and setting up for the worst 5-day performance since the end of January. While there were signs of a potential reversal towards the end of February, the current price action suggests that downside momentum remains strong.
Factors Contributing to the Decline
Several factors are contributing to the recent decline in natural gas prices. One of the primary drivers is a mild winter in the United States, which has resulted in lower demand for heating fuel. Additionally, there are concerns about the impact of the COVID-19 pandemic on global economic growth, which could further reduce demand for natural gas and other commodities.
Technical Analysis
From a technical perspective, natural gas prices are currently testing key support levels. While prices were able to push above the 20-day Simple Moving Average (SMA), the 50-day SMA has yet to be tested. The bearish Death Cross between these two SMAs, which occurred in December, remains in focus. Additionally, the falling trendline from August is maintaining the downside bias.
At present, prices are back to testing the 20-day SMA. If they break below this level, it could open the door to revisiting the February low at 2.52, and possibly even the 2020 low at 1.44. On the other hand, if prices are able to hold above the 20-day SMA, immediate resistance can be found at the 50-day SMA, followed by the 23.6% Fibonacci retracement level at 3.297.
What to Watch For
Traders and investors will be watching several key factors in the coming days to determine whether natural gas prices are likely to continue their decline or experience a reversal. One key factor is the weather forecast in the United States, which could provide insight into future demand for heating fuel. Additionally, traders will be monitoring economic data and developments related to the COVID-19 pandemic, as these factors could impact global economic growth and demand for commodities.
In conclusion, natural gas prices are currently experiencing a sharp decline, and are now testing key support levels. While there are several factors contributing to this decline, traders and investors will be watching several key factors in the coming days to determine whether prices are likely to continue their decline or experience a reversal.
