Weekly FX Technical Analysis - 26th October 2026

Currency markets enter one of the most significant weeks of the month, with the UK Budget and interest rate decisions from the Federal Reserve, European Central Bank and Bank of Japan all scheduled over the coming days. Sterling has staged a recovery against the dollar, although Wednesday's Budget could introduce considerable volatility as markets assess the government's fiscal credibility. Meanwhile, the euro remains under pressure, with French sovereign debt concerns pushing EUR/GBP towards 0.8400 and EUR/USD struggling to defend support around 1.1200. USD/JPY has also lost some upward momentum, consolidating near 157.00 ahead of further guidance from the Bank of Japan. With inflationary pressures, geopolitical uncertainty and shifting interest rate expectations influencing currency markets, this week's central bank decisions could prove particularly important in determining the next direction for major currency pairs.

GBP/USD

GBP/USD is trading around 1.3348, extending its recovery from the 1.3170 support zone and maintaining a position above its 20 day moving average near 1.3280. RSI has improved to approximately 52, suggesting momentum has shifted towards a more balanced outlook. However, the pair is approaching an important resistance area around 1.3410 to 1.3430, where the broader descending trendline could limit further gains.

Potential Scenarios

• Bullish: If GBP/USD sustains trading above 1.3280 and breaks through 1.3430, the pair could extend its recovery towards 1.3500 and potentially 1.3630. A sustained move above 1.3430 would strengthen the case for a broader bullish reversal.

• Bearish: Failure to overcome resistance around 1.3410 to 1.3430 could trigger renewed selling towards 1.3280. A break below this level would expose 1.3170, with further weakness potentially opening the door towards 1.3100.

Macro Backdrop to Consider

Sterling faces a particularly significant week, with Chancellor John Healey's Budget scheduled for 28 October alongside the Federal Reserve's interest rate decision. UK September inflation accelerated to 3.5%, strengthening expectations of a potential Bank of England rate increase in November. However, elevated gilt yields and government debt exceeding £3 trillion leave sterling vulnerable to any adverse market reaction to the Budget. Meanwhile, the Fed is widely expected to hold rates, with its guidance and Thursday's US GDP and PCE releases likely to determine the dollar's direction.

House View

Our house view is cautiously constructive, with sterling's recovery gaining credibility while 1.3280 holds. However, resistance around 1.3430 remains significant, and the approaching Budget introduces considerable uncertainty. We favour modest upside potential but remain wary of renewed selling should markets respond negatively to the government's fiscal proposals.

GBP/USD: OCTOBER ‘25 - PRESENT

EUR/GBP

EUR/GBP is trading around 0.8401, extending its pronounced downward trend and remaining below the previously significant 0.8450 support level. The pair recently approached 0.8370 before staging a modest recovery, with RSI near 30 indicating oversold conditions. Despite the possibility of a technical rebound, the persistent pattern of lower highs and lower lows continues to favour further downside.

Potential Scenarios

• Bullish: A corrective rebound could see EUR/GBP reclaim 0.8450 before testing 0.8500. A sustained recovery above this region would improve the short term outlook and potentially open a move towards 0.8560.

• Bearish: Failure to reclaim 0.8450 would maintain downward pressure, with 0.8370 and the lower Bollinger Band near 0.8350 providing the next downside targets. A decisive break below 0.8350 could expose 0.8300.

  
  

Macro Backdrop to Consider

France's sovereign debt difficulties remain a significant source of euro weakness, with the yield spread between French and German 10 year bonds reaching approximately 178 basis points last week, levels last seen during the eurozone debt crisis. Although Moody's decision to maintain France's credit rating provided some relief, fiscal uncertainty remains substantial. The ECB meets on 29 October and is expected to hold rates at 2.5%, while expectations of further Bank of England tightening provide relative support for sterling. Wednesday's UK Budget could nevertheless introduce volatility.

House View

Our house view remains bearish, favouring continued euro weakness against sterling while EUR/GBP trades below 0.8450. However, increasingly oversold conditions suggest a corrective rebound is possible. We would view a recovery towards 0.8500 as temporary unless there is a meaningful improvement in French fiscal confidence or a material deterioration in the UK outlook.

EUR/GBP: OCTOBER ‘25 - PRESENT

EUR/USD

EUR/USD is trading around 1.1212, consolidating near significant support following its prolonged decline from August highs around 1.1700. The pair remains below its declining 20 day moving average near 1.1230, with RSI around 37 indicating continued bearish momentum, albeit with some improvement from recent oversold conditions. The 1.1190 to 1.1200 support zone remains crucial to determining whether the euro can establish a sustainable recovery.

Potential Scenarios

• Bullish: A sustained hold above 1.1200, followed by a break through 1.1230, could encourage a corrective recovery towards 1.1310 and potentially 1.1360. A move above 1.1360 would provide stronger confirmation that the immediate bearish trend is weakening.

• Bearish: A decisive break below 1.1190 could trigger renewed selling towards the lower Bollinger Band around 1.1145, followed by 1.1100. Continued weakness below this region would expose the psychological 1.1000 level.

  
  

Macro Backdrop to Consider

The euro remains under pressure from French fiscal instability, although Moody's decision to maintain France's credit rating has temporarily eased concerns. Thursday's ECB meeting is expected to leave rates unchanged, with attention focused on Christine Lagarde's assessment of financial contagion risks and persistent energy inflation. Meanwhile, the Federal Reserve's Wednesday decision and Thursday's US GDP and PCE figures will be important drivers of dollar direction. Recent declines in US Treasury yields have provided some relief for the euro, although broader geopolitical uncertainty continues to support defensive positioning.

House View

Our house view remains cautiously bearish, with EUR/USD struggling to establish meaningful upside momentum. While a rebound towards 1.1310 is possible if 1.1200 holds, we expect resistance to remain significant. A sustained recovery above 1.1360 would be needed before adopting a more constructive outlook.

EUR/USD: OCTOBER ‘25 - PRESENT

USD/JPY

USD/JPY is trading around 157.33, retreating from recent resistance near 159.00 and consolidating below its 20 day moving average around 157.90. RSI has eased to approximately 47, reflecting a loss of bullish momentum following the recovery from September lows. The pair remains above important support around 156.00, but the failure to sustain gains above 158.90 suggests the immediate outlook has become more neutral.

Potential Scenarios

• Bullish: A recovery above 157.90 and subsequent break through 158.90 could encourage another test of 160.00. Sustained trading above this level would reopen the possibility of a move towards the major resistance zone around 161.50 to 162.00.

• Bearish: Failure to reclaim 158.90 could see renewed selling towards 156.00. A decisive break below this support would weaken the recovery structure and expose 153.50, followed by 152.00.

Macro Backdrop to Consider

The Bank of Japan meets on 29 and 30 October, with policymakers widely expected to maintain rates at 1.25% following September's increase. Markets will focus on Governor Kazuo Ueda's guidance regarding further tightening, with another increase potentially arriving in December or January. Friday's Tokyo inflation figures will also be closely watched. Meanwhile, the Fed's Wednesday decision and recent easing in US Treasury yields could influence the interest rate differential, providing additional support for the yen if American yields continue to decline.

House View

Our house view has shifted towards neutral, with recent price action suggesting USD/JPY may struggle to maintain its earlier upward momentum. We see scope for further consolidation between 156.00 and 159.00, although increasingly hawkish Bank of Japan guidance could favour a stronger yen. A sustained break above 160.00 would be required to restore a more confidently bullish outlook.

USD/JPY: OCTOBER ‘25 - PRESENT

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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.