Technical analysis: key levels for gold and crude

With commodities in freefall, driven in part by US dollar strength, another move lower seems highly likely for both gold and oil.

Gold bars
Source: Bloomberg

Gold loses its sparkle

Gold has sold off heavily over the past fortnight, losing $100 in value in under a month. The downtrend clearly remains in play despite the consolidation we have seen in the early part of this week.

Price is currently trading within a symmetrical triangle, which is a bearish formation in a downtrend and thus a downside breakout is expected in the near future. A break and close below $1088 would point towards another leg downwards, with support likely around $1085 and the key $1077 level (July low).

Alternately, a close above $1095 would point towards a more protracted retracement, with resistance likely at $1098, $1102, $1105 and $1111.

US crude selloff expected

Oil - US Crude has seen a choppy start to the week, with initial strength turning to losses yesterday. Ultimately, we are within a clear downtrend, which has lasted over four trading days.

Price has typically sold off from the 20-hour SMA, with a deeper retracement moving up to the 50-hour SMA before selling off.

This morning we are seeing price at the 20-hour SMA, with the stochastic seeking to imminently roll over. Thus further downside seems likely, with the $44.52 support the first hurdle and $43.58 being the next notable support level.

This bearish view holds unless price moves and closes above $45.92.

Brent leads WTI lower

Oil - Brent Crude is leading US crude, with this form of oil selling off in advance of the US variety in a clear hint as to what could happen in the other market.

Price is currently moving towards yesterday’s low of $47.68, which if broken will lead to an expected move down towards the major $47.03 support level. Price would need to move back above $49.01 to negate the bearish view.

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