Technical analysis: key levels for gold and crude

Gold and Brent have been turning lower thanks to the dollar resurgence. Could this spark further downside or will we see a recovery for commodities?

Oil pump
Source: Bloomberg

Gold falls into trendline confluence

Gold has tumbled lower once more overnight, with the price falling back into trendline support. Both ascending and descending trendlines have formed a confluence of support around $1242, which provides a potential area for bulls to come back.

Irrespective of whether we see these trendlines mark the bottom or not, as long as the price remains above $1226, another leg higher seems likely before long. With that in mind, look out for potential buying areas within the Fibonacci retracements.

Brent begins to turn lower once more

Brent managed to create the first intraday low in three weeks yesterday, following continued pressure on the top end of its $54.00-$57.46 range. Given that we saw a lower high precede this move, there is reason to believe we could see the price of Brent turn lower from the 76.4% retracement. So far, any rally into that area could be an interesting area for shorts.

However, a break back above $57.04 would point towards a move back into the $57.46 resistance. Given the continuous moves into that resistance level, the alternative is to look for shorts for a move back to $55.63, yet utilizing the $57.46 region for stops, thus reducing the risk/reward and improving the chances of being right.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.

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