Natural Gas recovery fades around $2.45 as traders skate on thin ice ahead of Fed

Natural Gas recovery
  • The price of natural gas declines after recovering from a one-month low the day before.
  • Hopes for increased energy demand and prior geopolitical concerns caused XNG/USD to increase.
  • President Xi of China’s failure to confirm additional gas pipelines from Russia to query buyers is now accompanied by pre-Fed worry.
  • For unambiguous directions, risk catalysts and EIA inventories will be crucial.

Ahead of Wednesday’s crucial Fed monetary policy meeting, the price of natural gas (XNG/USD) struggles to maintain the day’s recovery from the monthly low. Recent news from China and the cautious atmosphere ahead of Thursday’s official Weekly Natural Gas Storage Change report from the US Energy Information Administration may further pose challenges to the XNG/USD pricing (EIA). Yet, the energy source is still only moderately offered for $2.44 as of the time of the press.

The market had hoped to overcome the financial fallouts to support the XNG/USD purchasers the day before when it was announced that Russia would build new pipelines to carry additional natural gas to China. The Chinese president, Xi Jinping, later pushed the gas buyers back after declining to confirm the arrangement.

Prior to the most recent decline, the price of natural gas appears to have been supported by Japan’s two trillion Yen stimulus programme, which provided energy subsidies to households in an effort to reduce the burden of inflation on the country’s population.

It should be mentioned that even while the US Dollar loses some of the previous day’s gains from its recovery from a five-week low, the recent mixed US data and the market’s hawkish expectations of seeing a 0.25% rate hike from the US Federal Reserve weigh on the commodities price.

Also, Bloomberg’s report that Italy is putting up new LNG terminals to combat the energy crisis caused by Russia and the expectation of a mild winter in Europe is a problem for XNG/USD purchasers.

It should be highlighted that the price of natural gas might increase if today’s Fed decision weakens the US dollar and/or if the previous -58B weekly EIA inventories are significantly reduced.

Technical examination
Even though the oversold RSI (14) joins many levels at $2.35–30 to test the Natural Gas bearish, the 10-DMA barrier surrounding $2.53 still presents a problem for XNG/USD purchasers.