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Weekly FX Technical Analysis - 19th October 2026
Currency markets enter the week with the dollar retaining its underlying strength, while European political instability and shifting central bank expectations continue to drive volatility. Sterling has staged a modest recovery against the dollar, although the approaching UK Budget introduces fresh uncertainty. The euro remains particularly vulnerable as France's fiscal difficulties are compounded by widespread civil unrest, pushing EUR/GBP and EUR/USD towards important technical support levels. Meanwhile, USD/JPY continues to consolidate below 160.00 as investors weigh further Bank of Japan tightening against persistent US dollar demand. With renewed tensions in the Strait of Hormuz, shifting US energy policy and inflation pressures influencing global interest rate expectations, the coming sessions could prove particularly significant for currency markets.
GBP/USD
GBP/USD is trading around 1.3316, recovering from the 1.3170 support zone and moving back above its 20 day moving average near 1.3250. RSI has recovered to approximately 51, suggesting bearish momentum is easing. However, the broader recovery remains incomplete, with resistance around 1.3350 and 1.3430 still limiting upside potential.
Potential Scenarios
Bullish: If GBP/USD holds above 1.3250 and breaks through 1.3350, the pair could recover towards 1.3430 and potentially 1.3500. Sustained trading above 1.3430 would provide stronger confirmation of a recovery.
Bearish: Failure to sustain the recovery above 1.3250 could trigger another test of 1.3170. A decisive break below this established support would expose 1.3100 and potentially the psychological 1.3000 level.
Macro Backdrop to Consider
September US inflation surprised to the upside at 3.7%, reinforcing expectations of further Federal Reserve tightening. Fed Chair Kevin Warsh has avoided signalling his next move despite highlighting inflationary pressures from AI investment. Meanwhile, the UK's 28 October Budget approaches amid elevated gilt yields and diminished fiscal headroom, leaving sterling sensitive to questions surrounding Chancellor John Healey's fiscal credibility.
House View
Our house view is cautiously neutral, with scope for a short term sterling recovery while 1.3250 holds. However, dollar strength and UK fiscal uncertainty limit our conviction, and a sustained break above 1.3430 is needed before adopting a more constructive outlook.
GBP/USD: OCTOBER ‘25 - PRESENT
EUR/GBP
EUR/GBP has extended its decline towards 0.8414, breaking below the established 0.8450 support level and maintaining its wider bearish trajectory. RSI has fallen towards 22, signalling deeply oversold conditions. While this increases the possibility of a corrective rebound, the persistent pattern of lower highs and lower lows suggests that sellers remain firmly in control.
Potential Scenarios
Bullish: An oversold recovery could see EUR/GBP reclaim 0.8450 before testing 0.8500 to 0.8510. A sustained break above this area would improve the short term outlook and potentially open a recovery towards 0.8550.
Bearish: Continued trading below 0.8450 would maintain downward pressure, with 0.8400 and the lower Bollinger Band around 0.8385 providing the next potential targets. Further weakness could expose 0.8350.
Macro Backdrop to Consider
France's fiscal crisis has intensified following widespread protests and weekend riots, further undermining confidence in French government debt. French bond yields remain near multidecade highs, with spreads over German bonds approaching 140 basis points. This political instability is weighing heavily on the euro, while expectations of further Bank of England tightening continue to support sterling comparatively, despite approaching UK Budget risks.
House View
Our house view remains bearish, favouring further euro weakness against sterling. However, extreme oversold conditions suggest a technical rebound is increasingly possible. Any recovery towards 0.8500 may prove temporary unless the underlying French fiscal outlook improves.
EUR/GBP: OCTOBER ‘25 - PRESENT
EUR/USD
EUR/USD is trading around 1.1203, consolidating near significant support following its prolonged decline from September highs. The pair remains below its declining 20 day moving average around 1.1270, while RSI near 34 indicates persistent bearish momentum despite a modest recovery from oversold conditions. The 1.1190 to 1.1200 zone is now critical to the immediate outlook.
Potential Scenarios
Bullish: A sustained hold above 1.1200 could encourage a corrective recovery towards 1.1270, followed by 1.1340. A break above 1.1340 would suggest the current downward momentum is beginning to reverse.
Bearish: A decisive break below 1.1190 would expose the lower Bollinger Band around 1.1110, with further downside potential towards 1.1000 if selling pressure accelerates.
Macro Backdrop to Consider
The euro faces simultaneous pressure from French sovereign debt concerns and persistent dollar demand. US inflation reaching 3.7% has strengthened the case for further Fed tightening, while renewed disruption in the Strait of Hormuz continues to threaten global energy supplies. Trump's move towards easing Russian oil sanctions has provided some relief, but ECB President Christine Lagarde has warned that tightening eurozone financing conditions could increasingly undermine growth.
House View
Our house view remains bearish, although the proximity of major support around 1.1200 makes a corrective bounce plausible. We favour selling pressure returning on rallies unless EUR/USD can reclaim 1.1340, with French political instability continuing to undermine confidence in the currency.
EUR/USD: OCTOBER ‘25 - PRESENT
USD/JPY
USD/JPY is trading around 158.12, maintaining its recovery from September lows near 153.00. Price is consolidating beneath immediate resistance around 158.80 to 160.00, while RSI around 53 suggests relatively balanced momentum. The recovery remains technically constructive, although repeated failures around 160.00 underline the importance of this resistance zone.
Potential Scenarios
Bullish: A sustained break above 158.80 could see USD/JPY challenge 160.00, followed by the major resistance area around 161.50 to 162.00. A breakout beyond this zone would strengthen the broader bullish outlook.
Bearish: Failure to overcome 158.80 to 160.00 could prompt renewed weakness towards 156.00. A decisive break below this support would expose 153.50 and potentially 152.00.
Macro Backdrop to Consider
Bank of Japan Governor Kazuo Ueda has indicated that underlying inflation is now close to the 2% target, strengthening expectations of further rate increases following September's hike. However, Prime Minister Sanae Takaichi's willingness to consider additional debt issuance to fund tax reductions complicates the outlook. The approaching 30 October BoJ meeting and continuing Japanese intervention concerns could restrain dollar gains above 160.00.
House View
Our house view is cautiously bullish while USD/JPY holds above 156.00, with scope for another test of 160.00. However, the narrowing interest rate differential and possibility of Japanese intervention make us reluctant to anticipate a sustained breakout above 161.50.
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.
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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.
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