Does a Rise in the Dollar Impact Natural Gas Prices?
What Are the Important Catalysts for Natural Gas?
Natural gas and the US Dollar Index
In the last six trading sessions, natural gas (UNG) (DGAZ) (BOIL) (GASL) (FCG) fell about 0.8%, while the US Dollar Index (UUP) (USDU) rallied around 1.3%. In last six trading sessions, natural gas futures and the US Dollar Index moved in opposite directions. The rise in the US Dollar Index could be an important factor for the fall in natural gas prices—apart from the inventory and weather.
Natural gas’ movement
On May 2, 2016, the US Dollar Index closed at $92.62—its lowest level for 2016 to date. Between May 2 and May 18, the US Dollar Index moved up about 2.6%, while natural gas futures fell 2%. Between May 2 and May 18, in six instances out of ten trading sessions, the US Dollar Index and natural gas moved in opposite directions based on the closing price. This indicates an inverse relationship between the two. The US Dollar Index could be responsible for driving natural gas prices lower. Check out our analysis of how the US Dollar Index impacts crude oil and natural gas. The above graph shows the price movement of natural gas futures and the US Dollar Index between May 2 and May 18, 2016.
Natural gas–weighted stocks
The above analysis is important for natural gas–weighted stocks such as Range Resources (RRC), Antero Resources (AR), Rex Energy (REXX), and Memorial Resource Development (MRD).
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