Technical analysis: key levels for gold and crude

With gold pulling back and crude on the rise, are we seeing a return of risk appetite in financial markets?

Oil pump
Source: Bloomberg

Gold falls into Fib support

Gold fell through trendline support yesterday, with the price retracing into the 61.8% level ($1244). For now the current uptrend remains intact, and it will do so until we see a break back below $1235.

However, the wider perspective points towards a potential bearish reversal and thus any further gains are simply seen as a retracement of the June sell-off. With that in mind, while we could be looking at further gains coming into play, there is the risk of the bearish medium term picture taking hold once more.

Brent breaks higher, with Fibonacci resistance ahead

Brent broke sharply higher yesterday, with the price pushing well above Thursday’s high to negate the bearish rising wedge pattern. This brings us into the possibility of a wider ABC correction before moving lower. The past two retracements came in at 76.4%, which would mean a rally into $52.43 on this occasion.

But given the existence of the descending trendline, there is a good chance the retracement is shallower than before. As the market is currently consolidating around the 61.8% level, it is worth keeping an eye out for potential bearish reversal signs. Otherwise, a rally into trendline resistance and the 70% level could bring a strong risk-to-reward short term into play.

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