Weekly FX Technical Analysis - 12th October 2026

This week’s FX charts continue to show pressure on both sterling and the euro against the dollar, with EUR/USD pressing into major support around 1.1200 and GBP/USD still fragile above the 1.3150 to 1.3200 zone. EUR/GBP has extended its move lower into oversold territory, while USD/JPY has recovered but remains capped below the key 160.00 area. The macro backdrop remains dominated by Middle East energy risk, French fiscal concerns, US inflation data and the prospect of further central bank tightening before year end.

GBP/USD

GBP/USD is trading around 1.3240 after stabilising above the 1.3150 to 1.3200 support zone. The pair remains below the 20 day moving average and recent price action still looks fragile, but the downside move has paused for now. A recovery above 1.3350 would improve the short term picture, while a break below 1.3150 would risk another leg lower.

Potential Scenarios

• Bullish: If GBP/USD can hold above 1.3150 to 1.3200 and recover through 1.3350, the pair could move back towards 1.3430 and then 1.3500. A stronger break above 1.3500 would bring 1.3600 back into focus.

• Bearish: If the pair breaks below 1.3150, downside pressure could extend towards 1.3050 and then 1.3000. A sustained break below 1.3000 would materially weaken the wider technical picture.

Macro Backdrop to Consider

Sterling remains vulnerable to broad dollar strength, with the dollar close to an 18 month high as markets focus on this week’s US inflation data and the risk of further Fed tightening. UK inflation pressure also remains live, with the Bank of England highlighting Middle East driven energy volatility and holding Bank Rate at 3.75 percent.

House View

Our house view is cautiously bearish while GBP/USD remains below 1.3350. The 1.3150 to 1.3200 zone is the key area to defend, but rallies may struggle unless the pair can move back above 1.3350.

GBP/USD: OCTOBER ‘25 - PRESENT

EUR/GBP

EUR/GBP is trading around 0.8450 after extending its move lower and breaking beneath the recent 0.8475 support area. RSI is now heavily oversold, which raises the risk of a short term bounce, but the broader technical structure remains weak. The pair needs to reclaim 0.8500 and then 0.8560 to suggest that the downside pressure is easing.

Potential Scenarios

• Bullish: If EUR/GBP can recover above 0.8500 and then 0.8560, the pair could move towards 0.8600 to 0.8640. A break above 0.8640 would suggest a more meaningful recovery.

• Bearish: If the pair fails to regain 0.8500, downside pressure could extend towards 0.8400. A sustained break below 0.8400 would confirm a deeper bearish continuation.

  
  

Macro Backdrop to Consider

The euro remains under pressure from French fiscal concerns and wider eurozone bond stress, while sterling has outperformed the euro despite its own domestic issues. French and Italian debt have seen renewed pressure, with investors scrutinising France’s debt load, budget deficit and political outlook ahead of 2027.

House View

Our house view is bearish while EUR/GBP remains below 0.8500. The pair is oversold and may bounce, but the wider signal remains negative unless 0.8560 to 0.8600 is reclaimed.

EUR/GBP: OCTOBER ‘25 - PRESENT

EUR/USD

EUR/USD is trading around 1.1200 after a sharp move lower from the 1.1600 area. The pair is now sitting on a major support zone around 1.1200, with RSI deeply oversold. This leaves room for a corrective bounce, but the technical picture remains bearish while price stays below 1.1340 to 1.1400.

Potential Scenarios

• Bullish: If EUR/USD can hold above 1.1200 and recover through 1.1300, the pair could move back towards 1.1340 and then 1.1400. A break above 1.1400 would be needed to improve the wider outlook.

• Bearish: If the pair breaks below 1.1200, downside pressure could extend towards 1.1150 and then 1.1100. A sustained break below 1.1100 would open the door to a more significant bearish extension.

  
  

Macro Backdrop to Consider

EUR/USD remains weighed down by a combination of dollar strength, French fiscal risk and energy related inflation pressure. The ECB’s September projections warned that the eurozone outlook remains highly uncertain due to the Middle East conflict, the blockade of the Strait of Hormuz and volatile energy prices, while Reuters reported the euro has now fallen for five consecutive weeks.

House View

Our house view is bearish while EUR/USD remains below 1.1340 to 1.1400. The pair is oversold at current levels, but unless 1.1400 is reclaimed, rallies may continue to be sold.

EUR/USD: OCTOBER ‘25 - PRESENT

USD/JPY

USD/JPY is trading around 158.45 after recovering from the early September sell off. The pair is back above the 156.00 support area but remains below the important 160.00 to 162.00 resistance zone. RSI is now back in neutral territory, suggesting momentum has stabilised, although the pair still faces resistance as it approaches 160.00.

Potential Scenarios

• Bullish: If USD/JPY can break above 160.00, the pair could retest 161.00 to 162.00. A move above 162.00 would bring 164.00 back into focus.

• Bearish: If the pair fails below 160.00, price could rotate back towards 156.00 and then 153.00. A break below 153.00 would reopen the path towards 152.00 and 150.00.

Macro Backdrop to Consider

USD/JPY remains caught between dollar yield support and rising Japanese policy risk. The dollar is still supported by elevated inflation concerns, but Bank of Japan officials have continued to signal future rate hikes, with Reuters reporting that even a previously dovish policymaker now supports raising rates in stages as inflation risks remain skewed to the upside.

House View

Our house view is neutral while USD/JPY remains between 156.00 and 160.00. A break above 160.00 would improve the short term outlook, but Japanese policy normalisation and intervention risk remain important headwinds.

USD/JPY: OCTOBER ‘25 - PRESENT

As always, if you’d like to discuss these moves in more detail, or how they could impact your business or personal requirements, please don’t hesitate to get in touch.

info@k2-fx.com

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Disclaimer: The information in this publication is provided for general information purposes only. It does not constitute financial or investment advice, nor should it be relied upon as such. Readers should consider their own circumstances and seek independent advice where appropriate.