Technical analysis: key levels for gold and crude

As the dollar rallies sharply, we are seeing commodity weakness across the board. Crucially, gold is approaching a massive support zone that will determine the state of play for weeks and even months to come. Meanwhile, crude prices are breaking lower, with signals pointing towards a potential period of downside for both Brent and WTI.

Oil refinery plant
Source: Bloomberg

Gold approaching massive support zone

Gold has sold-off sharply in recent days, as US rate hike expectations rise. However, this has taken us back to a crucial support area, with the July low of $1311, followed by a cluster of levels between $1303 and $1307. These encompass historical swing highs and swing lows spanning recent months and also the peak from January 2015.

With that in mind, we are around a critical region, where the price of gold needs to turn higher, or else it could get ugly. As such, watch out for potential bullish reversal signals on the short-term, with an hourly close above $1316 pointing towards a more extended move higher. 

Brent breaking lower

Brent saw a sharp move lower yesterday, with price breaking below the key $48.82 support level. With the moving averages all spanning outwards, alongside a retest of previous support, turned resistance, there is reason to believe we are going to see a period of downside for Brent.

As such, watch out for lower highs and lower lows as this move extends lower. The bearish outlook remains until we see a new higher high created. On this occasion that means an hourly close above $48.82. 

WTI selling-off from resistance

WTI is also pushing lower this morning, following on from a retest of the ley $46.64 resistance level. Once more, we are seeing an expansion of the moving averages, following a break of the 50 below the 100-day simple moving average.

Overall, this looks like a bearish breakdown and we will be looking out for lower highs and lower lows to be created. This bearish view remains unless we see an hourly close above $46.76.

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