Weekly FX Technical Analysis - 5th October 2026

This week’s FX charts show a clear shift back towards dollar strength, with GBP/USD and EUR/USD both breaking lower into important support zones. EUR/GBP has also fallen sharply, with euro weakness being driven by renewed concern around French fiscal risk and wider eurozone bond market pressure. USD/JPY has stabilised following its early September decline, but remains caught between dollar yield support and the risk of Japanese policy normalisation or further intervention concerns.

GBP/USD

GBP/USD is trading around 1.3230 after a sharp move lower from the 1.3600 region. The pair is now testing the key 1.3150 to 1.3200 support zone, which has repeatedly acted as a base over recent months. RSI remains soft, suggesting bearish pressure is still present, although the pair is approaching an area where a short term rebound could develop if support holds.

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 1.3500. 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 caught between a more resilient UK rate outlook and broad dollar strength. The Bank of England held Bank Rate at 3.75 percent in September, although three members voted for a hike, while the Bank also highlighted energy driven inflation risks from the Middle East conflict. The dollar continues to benefit from elevated Treasury yields and expectations that the Fed may still tighten again later this year, despite weaker US jobs data reducing the likelihood of an October hike.

House View

Our house view is mildly bearish while GBP/USD remains below 1.3350. The 1.3150 to 1.3200 area is now critical, and a failure to hold this zone would leave the pair exposed to a deeper move towards 1.3000.

GBP/USD: OCTOBER ‘25 - PRESENT

EUR/GBP

EUR/GBP is trading around 0.8465 after breaking below the 0.8500 area. The move lower has pushed the pair into oversold territory, with RSI now stretched on the downside. The technical picture has weakened sharply, although the speed of the decline means a short term bounce cannot be ruled out if the pair stabilises around current levels.

Potential Scenarios

• Bullish: If EUR/GBP can recover back above 0.8500 and then 0.8560, the pair could move towards 0.8600 to 0.8635. A break above 0.8635 would be needed to suggest a more meaningful recovery.

• Bearish: If the pair fails to regain 0.8500, downside pressure could extend towards 0.8450 and then 0.8400. A break below 0.8400 would confirm a deeper bearish continuation.

  
  

Macro Backdrop to Consider

The euro is under pressure from a renewed focus on French fiscal risk and wider eurozone bond market stress. Reuters reported that the euro fell to a 17 month low against the dollar as concerns over France’s debt burden and political instability widened the French German yield spread to levels not seen since 2011. Against sterling, this has outweighed UK domestic concerns for now, particularly after recent UK GDP revisions reinforced expectations that the BoE may keep policy tighter for longer.

House View

Our house view is bearish while EUR/GBP remains below 0.8500. The pair is oversold, so a near term bounce is possible, but the broader signal remains negative unless 0.8560 to 0.8600 is reclaimed.

EUR/GBP: OCTOBER ‘25 - PRESENT

EUR/USD

EUR/USD is trading around 1.1205 after a decisive break below 1.1400. The pair has fallen sharply and is now pressing into the lower end of its wider range. RSI is deeply oversold, which raises the risk of a corrective bounce, but the overall technical structure remains bearish while price stays below 1.1400.

Potential Scenarios

• Bullish: If EUR/USD can stabilise above 1.1200 and recover through 1.1300, the pair could move back towards 1.1400. A break above 1.1440 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

The euro is being hit by a difficult combination of dollar strength, French fiscal concerns and energy related inflation risk. Eurozone inflation is still being complicated by the Middle East conflict and the blockade of the Strait of Hormuz, with the ECB’s September projections warning that the outlook remains highly uncertain. At the same time, the dollar remains supported by high Treasury yields and expectations that the Fed could still raise rates in December, even as markets have largely priced out an October move.

House View

Our house view is bearish while EUR/USD remains below 1.1400. The pair is oversold and could bounce from 1.1200, but the break lower suggests rallies may be sold unless price can reclaim 1.1400 to 1.1440.

EUR/USD: OCTOBER ‘25 - PRESENT

USD/JPY

USD/JPY is trading around 157.75 after recovering from the early September sell off. The pair has moved back above 156.00 but remains below the important 158.50 to 160.00 resistance zone. RSI has normalised, suggesting the immediate downside pressure has eased, although the pair is still trading within a fragile recovery structure.

Potential Scenarios

• Bullish: If USD/JPY can break above 158.50, the pair could retest 160.00. A move above 160.00 would bring 161.00 to 162.00 back into focus.

• Bearish: If the pair fails below 158.50, 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 highly sensitive to Japanese policy signals and intervention risk. Reuters reported that the yen has found some support from safe haven demand, stronger inflation signals and government efforts to reassure markets on fiscal responsibility. Japan’s economy minister has also said the country no longer needs excessively loose monetary policy, reinforcing expectations that the Bank of Japan may continue normalising policy if inflation remains firm.

House View

Our house view is neutral while USD/JPY remains between 156.00 and 158.50. A break above 158.50 would improve the short term outlook, but intervention risk and Japanese policy normalisation remain important risks above 160.00.

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.