Levels to watch: gold, silver and crude

The dollar is king. The dollar index is currently testing a very long-term trendline resistance, 25 years old, that is capping commodity gains. 

Silver bars
Source: Bloomberg

Bear in mind that a trend is in motion until that trend ends, so given current bullishness around the dollar; the potential for a short squeeze in the commodity space remains both a concern and a potential opportunity.

Gold RSI oversold

Now that gold has fallen below key support at $1180/oz one could expect this level to act as resistance to upside. The lows around $1160 have seen some bidding but with price action falling below the 100-month moving average for the first time since 2002, it is possible that any short squeeze will run into trouble around this metric at $1185. The daily relative strength index looks oversold, but with dollar strength being the key to the moves any pull backs could be viewed as opportunity.

The gap on the short-term chart has been filled, so we may see a consolidative pattern before the next catalyst. A measured move, on a break, given the rectangular price action between $1173 highs and the $1160 lows could be considered.

The downside target now resides around $1050-60 in the medium term.

Silver could target $16.70

Having dipped as low at $15.75, the metal appears to be finding an element of support at this level. This, coupled with the slight divergence on the daily RSI, indicates that we may consolidate in the near term.

We have filled the gap down now but would keep a close eye on a potential double bottom on the hourly chart, with resistance coming from the 50-hour MA. A move through $16.24 could target $16.70 – the top of the potential consolidation range.

A move back down through $15.75 targets $14.50.

WTI could return to $83

The last time the oil price fell through the 100-month MA (December 2008) it quickly went on over the subsequent month to test the 200-month MA – an additional 31% loss.

Right now, oil remains in a range with the $79.80/bbl marker giving decent support at the moment – a move back to the $83 level remains a possibility with the degree of RSI divergence on the daily. Breaking above $81 would support this move as price action trades above the 50-hour MA.

A break below the low at 79.50 target $77.30.

Brent supported by $83

The potential inverted head and shoulders on the one-hour chart should be watched. The neckline lies at $86.20-30, so any hourly closes through here could see the short squeeze take hold and would target $86.70, then $87.15 in the near term.

Daily support comes from the $83 level, and Brent remains trapped in a rectangular range with $88 at the top. The weekly chart is much oversold and the recent weekly candlesticks lack direction, with last week producing a long legged doji – a potential reversal signal. Watch for the weekly close – a green candle through $88.00/bbl would see a move northwards.

A move back through $85.06 takes us back to the $84.60 lows seen last week.

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