Technical analysis: key levels for gold and crude

Both gold and Brent have seen selling off from head and shoulders formations, as they move lower from key resistance levels. However, with recent downside in mind, could the overextended nature of both markets points towards a push higher over the short term?

Continued moves lower for gold from long-term resistance

Gold is moving heavily lower this week, with the fall below $1327 completing a head and shoulders formation following a move into the long-term resistance level of $1357.

This points towards further downside to come. However, it is worthwhile noting that with a bullish wedge forming, there is a chance that we will soon see the price break higher to post a wider retracement before selling off once more. The break above $1319 would signal the beginning of such a move, with the resulting Fibonacci being drawn from the $1346 peak. Until then, further downside is likely over the short term. 

Brent likely to retrace higher

Since completing its head and shoulders formation, Brent has been selling off sharply.

The subsequent breakdown has come within 18 points of the head and shoulders projected target, bringing about a chance of a move higher soon. The strength of the sell-off seen yesterday points towards a rebound over the short term, with the Fibonacci retracements coming into play. However, as long as the price does not break above $67.58, then another move lower seems likely before long. 

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