In mid-November, analysing the XNG/USD chart, we noted a rise in natural gas prices, outlined a system of trend channels, and suggested a possible pullback scenario.
Indeed, since then (as indicated by the arrow), U.S. gas prices retreated to the lower boundary of the orange ascending channel, forming a low at point B. From late November, renewed buying activity has been observed, driven by:
→ Seasonal factor: U.S. forecasts for December indicate below-average temperatures, sharply increasing demand for heating and electricity.
→ Export and geopolitics: The U.S. is exporting record volumes of liquefied natural gas (LNG). Europe continues to purchase U.S. gas to replace Russian supplies, while demand in Asia is also rising.
→ Anticipation of shortages: Due to high exports and early cold weather, traders are factoring in the risk that storage levels may deplete faster than usual.
Technical Analysis of XNG/USD
Price is currently near a resistance zone formed by:
→ The upper boundary of a broad descending channel, extended following a bullish breakout in late October.
→ The $4.800/MMBtu level, near which a peak formed in March.
→ The psychological $5.000/MMBtu mark.
At the same time, price action indicates bulls remain in control:
→ The lower boundary of the orange channel acts as support.
→ Low B resembles a false bearish breakout of low A, trapping short sellers who expected a breakdown.
→ Long lower wicks at low B indicate strong buying pressure.
Given this, it is reasonable to suggest that if U.S. gas prices failed to hold above $4.800/MMBtu in mid-November, December could prove more favourable for bulls, potentially establishing a three-year high.
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