Technical analysis: key levels for gold and crude

Gold weakness continues despite a brief bounce on Friday. However, with a falling wedge in play, another move higher seems likely. Meanwhile, crude weakness is showing signs of abating, with Brent breaking through key resistance.

Gold bullion bars
Source: Bloomberg

Gold

Gold continues to trade within a falling wedge pattern, following a double top formation earlier this month. While we are seeing the market trend lower, a falling wedge is bullish in nature and as such, the next big move is expected to be to the upside.

Therefore, while we could see further losses, these are likely to be minimal, as the pattern reaches its apex. A bullish signal comes with a closed hourly candle above $1340.

Brent

Brent has been showing some signs of resurgent strength, with the failure to create a new low being followed by a trendline break. For the time being, we remain within a downtrend, yet a break back through $49.00 could undermine that.

Over the short-term, the question is whether the current weakness is simply a continuation pattern before we move higher towards the $49.00 mark. As such, there is not a major bias in play, with the potential for a wider rally towards the $49.74 mark possible as a continuation of the original triangle pattern.

For today, watch out for trendline and 50-simple moving average support (currently $47.52), with a move back below $47.00 needed to reinstate the bearish view.

US crude

US crude has similarly seen some weakness in early trade today, yet crucially we have not seen price break through trendline resistance. With the stochastic turning lower and the creation of lower highs still in play, it looks more likely we will sell-off than rally.

However, the failure to break lower once more last week could be a warning sign and thus the bearish outlook carries less conviction. Ultimately we would need an hourly close above $47.50 to negate this downtrend.

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