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Technical analysis: key levels for gold and crude

Gold and crude have been in the hands of the dollar recently, with gold in particular gaining ground amid USD weakness. However, with the oil-producers meeting continuing to grab the headlines, there is reason to believe crude will begin to track the likeliness of a production freeze.

Gold bullion
Source: Bloomberg

Gold rally could come under pressure

Gold is managing to gain ground this morning, following on from an intraday head and shoulders breakdown yesterday. Given that sharp rally into the 76.4% retracement ($1352) over the past week, there is a strong chance we are going to see the two-month descending channel continue apace. With that in mind, we are looking out for some further weakness come into play to reverse some of the recent gains.

From a wider perspective, we would need to see a break above $1358 to breakout from the channel. However, for now, we are trading within a rising wedge pattern (bearish), which points towards a likely break down. As such, while we may not reach the 76.4% level to get short ($1350), the 70% or 61.8% levels still offer interesting areas.

Conversely, a move back above $1352 would point towards a continuation of this recent rally.

Gold price chart

Brent to retrace yesterday’s gains

Unfortunately yesterday’s short was going swimmingly until a massive drawdown in API crude stock pushed the price higher. With this, we have been set onto a bullish short-term trend once more. That being said, it makes more sense to wait for a retracement to get long and with Brent failing to gain significant ground this morning, there is a strong chance we will see some weakness come through.

The US crude stocks number this afternoon should provide significant volatility and given that four of the past six readings have come in under estimates, we could see this event provide another leg higher if it occurs once more. We would need an hourly close below $47.83 to negate the short-term bullish trend.

Brent crude price chart

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