Crypto

Pound hit as crypto-contagion engulfs risky assets. Lower GBP/USD again?

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

  • Pound sterling support faded after American dollars took over the reinforcement
  • Crypto chaos has seeped into many markets as concerns rise over liquidity crunch
  • The US CPI is coming up and could see more volatility. Will be GBP/USD test the downside?

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The British pound has been swept up in the pandemonium emanating from the turmoil in the cryptocurrency space. The disintegration of FTX and its inability to strike a bailout deal with Binance led to a crash in risky assets.

The US Department of Justice said it is reviewing FTX’s situation and has been in contact with the SEC about it. There are fears that margin calls will cascade into demand for cash from other assets.

APAC actions followed Wall Street lower, and the US dollar resumed its all-round upward move at the New York close. He 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 fuel perceptions of Fed monetary policy.

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

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

On a month-to-month basis, the CPI excluding food and energy is expected to show a slight decline to 0.5% from 0.6% previously, with an annual reading expected at 6.5% from 6.6% previously.

Crude oil continues to languish after the sell-off, with the WTI futures contract below US$86 bbl, while the Brent contract approaches US$92.50 bbl. Gold held up well, trading above US$1,700 an ounce.

The full economic calendar can be viewed here.

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How to trade GBP/USD

GBP/USD TECHNICAL ANALYSIS

GBP/USD collapsed overnight after failing to overcome a recent peak at 1.1646 and this level may continue to offer resistance.

Further up, resistance may reach the previous high and breakout points at 1.1738, 1.1760 and 1.1890.

On the downside, support could be seen at 1.1148, 1.1061, 1.0924 and 1.0354 prior lows.

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

Please contact Daniel via @DanMcCathyFX on Twitter



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