Technical analysis: key levels for gold and crude

Gold and crude have all enjoyed a particularly strong few days, yet with these markets reaching important resistance zones, could we see them start to turn lower soon?

Gold bullion
Source: Bloomberg

Gold rally approaching key resistance zone

Gold has worked out particularly well this week, with a rally from $1307 up to yesterday’s peak of $1345. We remain within a descending triangle on the daily timeframe and the two trendlines up ahead have the potential to send the pair lower once more, continuing this formation. Essentially, until we see an hourly close above $1352, then there is always the possibility of another move lower.

As such, look out for a break below the most recent swing low as a reversal sign, with an hourly close below $1331 providing the current support level to watch for a bearish outlook to come into play. Until that happens, the bullish short-term outlook remains, albeit with more caution.

Brent turns lower from trendline resistance

Brent is moving lower this morning, with an inside trendline converging with the 76.4% Fibonacci retracement to provide us with a potential reversal. We would need to see an hourly close below $47.40 to give us more confidence that we are going to see a more protracted move lower for Brent.

Below that, the $47.20 support level is also very notable given that it provided resistance on two recent occasions. However, unless we see Brent push through $48.82, there is a good chance we are essentially seeing a short-term retracement and this could mark the beginning of a more bearish phase for Brent.

WTI turning lower after rally

WTI is also turning lower this morning, following on from a rally into the 70% retracement. This means it provides a 2:1 risk-to-reward ratio for a move back to the $43.08 low rather than breaking above $48.12. Given that we are seeing a descending triangle in play here, a bearish outlook always seemed just around the corner despite the gains we have seen this week.

An hourly close below $45.66 would provide a more bearish view for WTI, where any rally into the $46.60-46.93 zone would be perceived as an opportunity to get short once more rather than anything more telling of the innate strength for this market.

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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.