Technical analysis: key levels for gold and crude

Gold consolidates into a triangle once more, highlighting the choppiness of risk sentiment of late. Meanwhile, the rally in crude is starting to falter, yet this seems likely to be a short-term retracement.

Gold bars
Source: Bloomberg

Gold triangle to dictate play
Yet again we are looking at a triangle in gold following the breakout seen last week that led to a spike higher. The fact that we have seen a number of triangles in this market means we have experience of knowing how it typically responds to a break. In this case, we know that directional volatility often follows a break and thus this triangle is well worth watching closely as the week progresses.

As ever, the key will be a break and closed hourly candle above the first swing high ($1240) or below the first swing low ($1202) out of the pattern to dictate play. Until we see that, it seems sensible to expect this pattern to remain in play and thus watch out for intraday reversal signs around the upper and lower trendlines.

Gold chart

US light drifts lower overnight
Yesterday’s big rally in US light brought the price back up towards last week’s high of $33.97. The inability to break through that level could be telling.

However, for now the uptrend seen over the past week remains in play and thus another move higher soon seems likely, with the bearish primary trend coming back into play with a break back below $31.18. Thus it seems sensible to watch out for potential bullish reversal signals within this move lower, where the 50% retracement at $32.53 and 61.8% retracement around $32.25 seem key.

Until we see any bullish reversal signals, a continuation of this drift lower is on the cards in the short-term. 

US light crude chart

Brent sells off well ahead of resistance
The inability to break through yesterday’s high is much more pronounced within Brent, although we did see a push back up above the first swing high at $34.84. As such, this pullback also looks like a short-term retracement of a bullish wider move.

Thus, while further downside is clearly a possibility today, be aware we could see some bullish reversal signals coming into play above $33.14. A move back below $33.14 would bring the bearish view back into play.

Resistance levels of note are $34.84, $35.44 and $36.10, with support levels of $34.16 and $33.14 in view over the short-term horizon.

Brent crude chart

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This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.