Natural Gas Price Fundamental Daily Forecast – Traders Being Influenced by Two Weather Models
Natural gas futures rallied for a sixth day and in the process, took out the last swing top, changing the main trend to up on the daily chart. However, the breakout took place without much fanfare, suggesting that the move was triggered by buy stops rather than aggressive buying.
On Wednesday, August natural gas futures settled at $3.094, up $0.30 or +0.98%.
The buying on Wednesday was strong enough to take out the previous main top at $3.102, changing the main trend to up, however, the rally stalled at $3.117, slightly below the June 7 main top at $3.127.
This suggests the true breakout level is $3.127. This may be the price that has to be taken out in order to generate the upside momentum needed to challenge the major retracement zone at $3.234 to $3.304.
The catalyst behind yesterday’s rally was a bullish weather forecast that should provide a boost in demand for natural gas.
According to natgasweather.com, during the June 28 to July 4 period, “overall natural gas demand will be moderate, however, demand will increase to high next week.”
Forecast
It looks as if the weather forecast to July 4 has been strong enough to take the market to current levels. This suggests that bullish traders are waiting for further confirmation that prices will remain hot past this date.
Currently, natgasweather.com is saying: “After a rather hot period July 4-8 for much of the country where highs of upper 80s to 100s will be widespread, the markets will turn to see if the hot ridge can hold over the east-central U.S. after.”
There is another weather model that shows “weather systems with modest cooling will be able to sneak across the Great Lakes and NE United States and shift the ridge toward the west-central U.S. to ease natural gas demand from soon to be high levels.”
The first scenario will be bullish for natural gas, the second will be bearish in my opinion. It would be nice if we knew ahead of the week-end, which model is emerging. This is because traders face the possibility of another gap opening next Monday.
Thursday’s U.S. Energy Information Administration’s weekly inventories report is expected to show a build of about 50 billion. However, this number may not mean much to traders because the primary focus will be on the two weather models.
This article was originally posted on FX Empire