The European economy is getting further support by falling gas prices. In particular the heavy industrial production in Germany is in need of a lot of energy and hence if prices come down, this would mean a further relief for the economy as a whole. The Futures market offered a further decline of about 15% this week, since the beginning of the year, prices have already fallen by 27%. Also, Chinese importers are seemingly rerouting their orders for March and April due to the low prices and high capacities to Europe.
No fear should be expected that due to the opening of the Chinese economy the demand rises fast, which could add to procurement pressure between China and Europe. However, the crisis is likely not going to be over for now. One of the biggest reasons, that the situation did not turn worse in Europe, was simply the rather warm weather during the winter months. The demand has been significantly lower compared to previous years.
Despite the clear trend in rising temperatures, we can’t expect the next winter season to be similarly mild. Until then the government, however, will have more time to potentially make structural changes in deliveries, whereas the reduction of the industrial production might not be a potential solution.
The gas price has been falling continuously for several months now, as the weekly chart suggests. Currently though, the market is trading right at an important support area. This zone has already acted as a support zone in December 2021. Should we see a rise from this level, further increasing prices might be the case. In this case we like to wait for the market to trade above last week’s high at around 4.00, which could help a fresh uptrend to be formed.
Since the market has been stabilizing since the beginning of the year according to this chart above, we expect higher prices anytime soon.
We like to get into a fresh buy position, when the market starts breaking out of the current downtrend. The daily chart might offer a good opportunity, should we see prices breaking above the 10- moving average (yellow color on the daily chart above). So, we would like to use a buy stop order at 3.85 with a stop loss under the current low of the market. Since the market might move much higher anytime soon, we would have a great reward to risk ratio for this trade.
⛔️Stop loss: 3.45
🎯profit 1: 4.45
🎯profit 2: 5.10
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