Natural Gas Price Forecast: XNG/USD portrays corrective bounce at 20-month low near $2.15

• Natural Gas price prints mild gains after declining to the lowest levels since August 2020 the previous day.
• Fears of supply crunch allow XNG/USD bears to take a breather at multi-month low.
• US Dollar rebound, expectations of warmer weather in Europe challenge gas buyers.
• Market sentiment, inflation data from China and US will be important for fresh impulse.

Natural Gas (XNG/USD) picks up bids to consolidate recent losses around $2.17, up 0.65% intraday during early Monday. In doing so, the energy source recover from the lowest levels in 20 months, marked the previous day, amid supply crunch fears emanating from China and Russia.

Taiwan President Tsai Ing-wen’s US visit triggered a fresh bout of US-China woes as Beijing conducts strong military drills near Taiwan Strait. The same could be considered as a risk-negative and a major challenge for Gas transportation, which in turn allows the XNG/USD to lick its wounds near the lowest levels since August 2020. “China's military simulated precision strikes against Taiwan in a second day of drills around the island on Sunday, with the island's defense ministry reporting multiple air force sorties and that it was monitoring China's missile forces,” reported Reuters.

On the other hand, the four-week downward trajectory by the US Dollar and chatters surrounding the Federal Reserve’s (Fed) rate cut in late 2023 also seem to underpin the corrective bounce of the quote, due to its inverse relations with the USD.

Furthermore, the beginning of the summer traveling season in Europe and Russia’s readiness to amplify geopolitical concerns about Ukraine, via using nuclear weapons in the multi-month-old war with Kyiv, also favor the XNG/USD buyers.

However, fears of downbeat winter in the West join Russia’s failure to capitalize on its gas monopoly to weigh on the Natural Gas price. On the same line could be the recession fears, mainly backed by the recent downside US data.

That said, Friday’s upbeat prints of the US Nonfarm Payrolls (NFP) bolster hawkish Fed bets. With this, the CME’s FedWatch Tool suggests 69% odds of the 0.25% rate hike in May, versus 55% before the US jobs report.

While portraying the mood, S&P 500 Futures print mild losses around 4,132 while snapping a two-day uptrend whereas the US 10-year and two-year Treasury bond yields remain pressured near 3.37% and 3.95% respectively. In doing so, the benchmark bond coupons extend the previous day’s losses and portray the market’s rush toward the risk-safety amid economic slowdown fears. Further, the US Dollar Index (DXY) licks its wounds around a two-month low while the WTI crude oil rises to $80.80 by the press time.

Looking forward, the Easter Monday holiday can restrict the market’s intraday moves. However, updates from the US Consumer Price Index (CPI) data and the latest Federal Open Market Committee (FOMC) Monetary Policy Meeting Minutes will be crucial for near-term directions as riskier assets seem losing their charm. It’s worth mentioning that the start of earnings season will also be important for traders to watch amid recession woes.

Technical analysis

Bears remain in the driver's seat targeting $2.00 unless the quote trades successfully beyond $2.40.