Technical analysis: key levels for gold and crude

With gold pulling back and crude on the rise, are we seeing a return of risk appetite in financial markets?

Oil pump
Source: Bloomberg

Gold falls into Fib support

Gold fell through trendline support yesterday, with the price retracing into the 61.8% level ($1244). For now the current uptrend remains intact, and it will do so until we see a break back below $1235.

However, the wider perspective points towards a potential bearish reversal and thus any further gains are simply seen as a retracement of the June sell-off. With that in mind, while we could be looking at further gains coming into play, there is the risk of the bearish medium term picture taking hold once more.

Brent breaks higher, with Fibonacci resistance ahead

Brent broke sharply higher yesterday, with the price pushing well above Thursday’s high to negate the bearish rising wedge pattern. This brings us into the possibility of a wider ABC correction before moving lower. The past two retracements came in at 76.4%, which would mean a rally into $52.43 on this occasion.

But given the existence of the descending trendline, there is a good chance the retracement is shallower than before. As the market is currently consolidating around the 61.8% level, it is worth keeping an eye out for potential bearish reversal signs. Otherwise, a rally into trendline resistance and the 70% level could bring a strong risk-to-reward short term into play.

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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.