Technical analysis: key levels for gold and crude

Bank of Japan easing sends gold initially lower, yet the subsequent spike retains the bullish outlook as we head into the FOMC meeting. Meanwhile, a divergence in Brent and WTI means we are awaiting the next move to establish a consistent story across both markets.

Miners
Source: Bloomberg

Gold volatility ends in spike

Gold has seen one of the most volatile periods following the BoJ announcement, with initial weakness setting us up for a nice spike through to $1323.

While we are seeing a little bit of weakness creep in, a bullish outlook is preferred as long as we remain above $1300. As such, it looks best to buy into dips with a view to see a strong week ahead (Federal Open Market Committee permitting).

Gold chart

Brent rallies into key resistance

Brent has managed to rally into an interesting area of resistance, which has provided the spark for the market to weaken over two recent occasions.

With Brent having broken lower from a symmetrical triangle, coupled with the fact that we have a heavily overbought sideways market, with a clearly defined resistance zone, a turn lower seems likely from here. Should we post an hourly close above $47.30, then this could set us up for a bounce, yet given the proximity to this major resistance zone, another leg lower is preferred. That being said, the outlook for WTI provides us with a very different story.

Brent chart

Will WTI signal shift in emphasis?

WTI has broken through a key resistance level, the likes of which we are watching in Brent. This break above $44.86 provides a potential warning sign that the same could happen in the Brent market.

Given the rally from the crucial $43.22 support level and subsequent double-bottom formation, it looks likely that we are seeing a retracement of the $48.12-$43.08 pullback. As such, Fibonacci levels are worth watching for resistance. Given the two different stories in Brent and WTI, it makes sense to await either an hourly close below $44.86 in WTI or above $47.30 in Brent, as this would supply us with a consistent story across both of these correlated markets.

WTI chart

This information has been prepared by IG, a trading name of IG Markets 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. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts

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.