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Technical analysis: key levels for gold and crude

Gold continues to consolidate at a crucial support zone, whereas Brent is gaining ground as it attempts to break out of the downtrend in place over the past month.

Gold bars
Source: Bloomberg

Gold consolidates at key support

Gold has failed to resolve the question of whether this downtrend is going to stay the course or reverse at a crucial confluence of support. That support zone is formed by utilising a long term ascending trendline (dating back to 2015) and the 76.4% retracement of the March-April leg higher.

So far we have seen the price respect the $1226 resistance level to the upside. As such, for a more bullish outlook to come to fruition, we will need to see the price break $1226 and subsequently $1236. Conversely to the downside, we will be looking for an hourly close below $1214 to point towards a resumption of this recent downtrend.

Brent paving the way for possible wider recovery

Brent managed to break and close above $50 yesterday, thus providing a bullish view for the short term. So far that has worked out well, with the price gaining ground since. Interestingly we have seen a push through the 76.4% retracement and trendline resistance this morning too, which is a sign that perhaps this short term recovery could have legs. For that to be confirmed, we would need to see an hourly close above $52.16. 

Watch out for the April low of $51.00 as potential resistance in the near term. With the stochastic hitting trendline resistance, after a push into the most overbought level in a month, it is worth noting that we could see some form of pullback soon. However, that could be fleeting, with a break below $48.54 needed to confirm a continuation of the downtrend in place over the past month.

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