Technical analysis: key levels for gold and crude

As gold hits a major support level and Brent creates a head and shoulders formation, there is a distinct possibility that today could see a reversal of fortunes for commodities.

Gold bars
Source: Bloomberg

Gold back to major support trendline
Today we are looking at the wider picture for gold, which has returned to a major trendline support. This trendline originates from the symmetrical triangle formed through the February-April period. How gold reacts to this trendline will be crucial to the day’s price action.

Given the uptrend in place over the past five months, there is a good chance people are looking to get long. With that in mind, a break higher and through the near-term resistance at $1268 could provide a spark to see this market surge today.

Alternately, a closed hourly candle through trendline support could provide yet another flush lower to continue the recent downtrend.

WTI at crucial support level
​The price fell heavily towards the $43.58 support level yesterday, in a continuation of the sideways consolidation we have seen over the past two weeks. This $43.58 level will be crucial to the day’s price action, where a continuation of this range is likely until we see an hourly close below $43.58.

Should that occur, the next support levels of note are $42.70 and $42.03. However, with price currently at the 76.4% retracement, a rally towards $46.00 is still a clear possibility from this deep retracement.

Brent leads the way, breaking to 19-day low
​The price has already seen a break lower, falling below $44.18 yesterday. This is a distinct warning sign for those trading Brent, with a head and shoulders pattern pointing to a high likeliness of further losses. In particular, a closed hourly candle below $43.52 would likely spark another leg lower.

Given that the head and shoulder projection comes in around $40.00, there could be significant downside to come. However, a break back through $46.43 resistance would negate this bearish view.

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