Natural Gas Market Outlook: XNG/USD Retreats After Slight Uptick from Support

  • Despite recording minor intraday gains, the natural gas market (XNG/) continues to face downward pressure, maintaining a position around ZAR 50.00. Its failure to cross the 50-day Simple Moving Average (SMA), along with bearish MACD signals, fuels optimism among sellers.
  • A horizontal support area around ZAR 48.89-48.67 remains a significant obstacle for the bears in the market. If the natural gas price falls below the ZAR 48.67 mark, additional support levels near ZAR 48.44 and within the ZAR 45.54-45.73 range may further challenge the sellers' dominance.
  • The 50-day SMA is curbing the immediate upward potential of the natural gas price near ZAR 51.14. A break past ZAR 51.74 could potentially lead to a new monthly high of approximately ZAR 54.83. These market dynamics are particularly relevant for South African investors due to the potential impact on various sectors and the currency exchange rates.

The natural gas market (XNG/USD) continues to face downward pressure, maintaining its position around ZAR 50.00, despite recording modest intraday gains in early Friday trading in Asia. This trend indicates the energy commodity’s defensive stance, as it recedes from an initial bounce off a six-week-long horizontal support zone. This market behaviour and its potential ripple effects are of significant interest to South African investors who have stakes in the global energy sector.

The XNG/USD pair has been unable to breach the 50-day Simple Moving Average (SMA) during the previous day’s corrective bounce. Coupled with bearish signals from the Moving Average Convergence Divergence (MACD) and consistent trading beneath the support-turned-resistance line stretching back to June 12, this sets up an optimistic environment for sellers.

Nevertheless, the previously mentioned horizontal support area, which comprises multiple levels traced back to May 16 and lies around ZAR 48.89-48.67, seems to pose a formidable challenge for the bears in the natural gas market.

Should the natural gas price dip below the ZAR 48.67 mark, the 100-day SMA support near ZAR 48.44, alongside the monthly horizontal region around ZAR 45.54-45.73, may prove to be obstacles for the XNG/ZAR bears, preventing them from gaining control of the market.

In contrast, the 50-day SMA curbs the immediate upward potential of the natural gas price near ZAR 51.14. Subsequently, the ZAR 51.53-51.74 range, marked by a convergence of a two-week-old support line, the weekly descending resistance line, and various levels set during June 19-20, could prove a tough barrier for the XNG/USD bulls to break.

Should the natural gas price remain strong and break past ZAR 51.74, the likelihood of reaching a new monthly high, currently near ZAR 54.83, should not be dismissed.

These dynamics unfolding in the natural gas market hold relevance for South Africa due to the country’s engagement in global energy markets. The performance of energy commodities such as natural gas can impact a wide range of sectors, from mining and manufacturing to financial services, and even the currency exchange rates. As such, close monitoring of these price movements and their potential impact on the South African economy is essential.

*All currencies in the article have been converted to the South African Rand

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