Mon. May 20th, 2024

NATURAL GAS (XNG/USD) RECOVERS AS ISRAEL PROMISES RESPONSE TO IRAN ATTACK

Natural Gas (XNG/USD) prices are getting some support on Tuesday after Israel issued a harsh statement saying that it has no choice but to retaliate again against Iran, ignoring several diplomatic calls and G7 leaders urging Israel to keep its head cool. 

  • Natural Gas prices show sensitivity towards the situation in the Middle East.
  • Markets were caught by surprise as Israel said it will retaliate against Iran.
  • The US Dollar Index pops back above 106.00 and is running into a winning streak. 

Natural Gas (XNG/USD) prices are getting some support on Tuesday after Israel issued a harsh statement saying that it has no choice but to retaliate again against Iran, ignoring several diplomatic calls and G7 leaders urging Israel to keep its head cool.

The sigh of relief seen on Monday after Iran said it does not want to seek any further escalation of tensions led to a 4% decline in Gas prices, but this proved to be short-lived. 

With risks of an escalating war still on the cards, the DXY US Dollar Index is thriving as the main safe haven for investors to park their funds.

As if that is not enough, the overall market narrative about US interest rates is changing, with investors pricing in that rates will either stay steady for longer or even rise further even as Federal Reserve (Fed) officials are still seeing a reason to cut this year.

The gap between market expectations and the Fed is substantially big, and could mean more US Dollar strength to come should Fed Chairman Jerome Powell this evening admit that cuts will be postponed. 

Natural Gas is trading at $1.91 per MMBtu at the time of writing.  

Natural Gas XNG/USD news and market movers: Middle East headlines main drivers

  • Despite several attempts from US Secretary of State Antony Blinken and several G7 heads of state, Israel is planning to advance with another attack on Iran in retaliation for the drone attacks over the weekend, several sources such as Reuters and Bloomberg report. 
  • European Gas prices are jumping higher as well on the back of Monday’s headline events out of Israel and Iran.
  • Unplanned works at Norway’s Nyhamna and Dvalin facilities are expected to take place for the rest of the week, seeing a lower than average Gas flow from Norway into Europe.
  • Swiss MET Group has expanded its LNG trading business with long-term capacities in Germany, Spain and Croatia. This further proves the massive international interest in the European Gas market. 

Natural Gas (xng/usd) Technical Analysis: Tit for tat 

Natural Gas prices are at risk of jumping higher with this tit for tat headline risk. Despite several diplomatic calls for Israel to keep its head calm and be the bigger person in the room, Israel said it has all rights to retaliate.

This means more tensions will arise in the region, while attention is diverted away from Gaza, and could see supply disruptions in Gas flows with possible key pipelines being sabotaged. 

On the upside, the red descending trend line at $1.99-$2.00 looks ready for another test. Should Gas prices snap above it, a quick rally to $2.11 could be seen. Not that far off, $2.15 in the form of the 100-day Simple Moving Average (SMA) becomes the main resistance level.

On the downside, the 55-day SMA around $1.88 should be a safety net. Next, the green ascending trend line near $1.83 should support the rally since mid-February. Should even that level break, a dive to $1.60 and $1.53 would not be impossible. 

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