British pound fell as crypto contagion devours risk assets. GBP/USD lower again?

British Pound, GBP/USD, US Dollar, Crypto, FTX, Crude Oil, Gold – Talking Points

• Support for the British pound faded as the US dollar resumed its strength
• Crypto chaos leaked into many markets as concerns grow into a liquidity crisis
• US CPI is ahead and could see more volatility. Will GBP/USD test the downside?

The British pound has been swept up in the pandemonium stemming from the turmoil in the cryptocurrency space. The dissolution of FTX and its inability to strike a bailout deal with Binance saw a meltdown of risk assets.

The US Department of Justice has said it is looking into the FTX situation and has been in contact with the SEC regarding the matter. A concern is emerging that there may be a knock-on effect from margin calls spilling over into demand for liquidity from other assets.

APAC shares followed the Wall Street decline, and the US dollar resumed its rise across the board until the New York close. It has given up some ground so far in the Asian session.

Tonight’s US CPI could be key for the US dollar and markets in general, as it could contribute to perceptions of where the Fed is headed with monetary policy.

Yesterday, Chicago Fed chief Evans softened from an ultra-hawkish stance. On the other hand, Richmond Fed President Barkin and Minneapolis Fed President Kashkari reiterated their highly hawkish views on monetary policy.

According to a Bloomberg survey of economists, the headline monthly CPI for October is forecast to be 0.6% versus 0.4% for September and 7.9% year-on-year versus 8.2% previously.

Month-on-month ex-food and energy CPI is forecast to ease slightly to 0.5% from 0.6% previously, with an annual reading expected to be 6.5% from 6.6% previously .

Crude continues to seep away after the sell-off, with the WTI futures contract below $86 a barrel, while the Brent contract nears $92.50 a barrel. Gold has held up well, trading above $1,700 an ounce.

The full financial calendar can be viewed here.

GBP/USD TECHNICAL ANALYSIS

GBP/USD collapsed overnight after failing to overcome a recent high of 1.1646 and that level could continue to offer resistance.

Further up, resistance could be at previous highs and break points at 1.1738, 1.1760 and 1.1890.

On the downside, support may lie at previous lows of 1.1148, 1.1061, 1.0924 and 1.0354.

Chart created in TradingView

— Posted by Daniel McCarthy, Strategist for DailyFX.com

Contact Daniel via @DanMcCathyFX on Twitter