Today’s Market Outlook
October 22, 2026
Broad yen strength amid falling equities and U.S. yields; focus on whether USD/JPY can extend its decline below 157
All times below are London time (BST).
Market Overview
Risk aversion is driving broad yen buying today, as equity markets fall. USD/JPY, which had traded around 158 through the previous day, declined from 158.25 in early Tokyo trading to a low of 156.77 in the London session.
The Nikkei fell 1,713.40 points from the previous day’s close, while selling spread across Asian markets, particularly in technology shares. European equities are also lower, and yen buying has continued into overseas trading.
Oil has risen as tensions in the Middle East worsen, while U.S. Treasuries have attracted demand and long-term U.S. yields have fallen. Today, dollar selling and yen buying linked to lower equities and U.S. yields have outweighed dollar demand from higher oil prices.
The focus now is whether yen strength will continue and how much of a rebound may follow the sharp, rapid decline.
USD/JPY
USD/JPY has fallen below 157, reaching its lowest level since September 30.
In the London session, the pair first rebounded from 156.83 to the 157.30s. It then came under renewed selling pressure and made a fresh low at 156.77. The rebound failed to hold, suggesting that selling pressure on rallies is currently strong.
The next downside reference is the September 30 low of 156.38. A decisive break below that level could bring 156.00 into view, followed by the lower boundary of the Ichimoku cloud near 155.65.
On a rebound, first watch whether the pair can recover 157 and hold above it. Beyond that, the 157.30s, where the London-session rebound stalled, are the next near-term resistance area.
However, USD/JPY has already fallen by around 1.5 yen since early in the day. If U.S. equities find support or U.S. yields rebound, profit-taking could trigger a recovery. Be mindful of the potential size of a rebound when considering further downside.
Falling Equities and Risk Aversion
The yen buying reflects a combination of falling technology shares and concerns about the Middle East.
Tesla’s decision to lower its capital expenditure plan for this year prompted a decline in Nasdaq futures. Selling spread to related shares in Asia, where Hong Kong and South Korean equity indices fell by more than the Nikkei.
Markets are sensitive to changes in investment plans by major technology companies. An increase in capital spending raises concerns about overinvestment, while a reduction raises concerns about weaker demand and slower growth.
Tonight, it will be important to see whether selling continues after regular U.S. trading begins. If declines spread to other sectors, yen buying may persist. If technology shares recover, USD/JPY and the yen crosses could also see buying interest return.
Oil and U.S. Yields
Reports concerning plans for attacks on Iran, tankers, and Saudi oil facilities have continued, adding to concerns about oil supply.
However, oil prices and U.S. yields are moving in opposite directions today. The U.S. 10-year Treasury yield briefly fell to around 5.08% in after-hours trading.
This appears to reflect not only inflation concerns, but also growing anxiety about weaker economic activity and stronger demand for U.S. Treasuries as a safe haven.
Even if oil continues to rise, a sustained decline in U.S. yields would limit the support for USD/JPY. Rather than focusing on oil alone, also watch how Treasuries and equities react.
EUR/JPY and GBP/JPY
The yen crosses are also broadly lower.
EUR/JPY briefly fell to 175.90, breaking below 176 for the first time since November 5 last year. The decline exceeded 1.70 yen from the previous New York close.
The immediate focus is whether the pair can recover 176. If it fails to hold above that level, selling on rallies may continue. Further up, the area around 177, which the pair broke below today, may act as resistance.
GBP/JPY also fell from 211.99 early in the day and at one point moved below 210.40. Strong UK inflation data are supporting sterling, but yen buying is currently stronger.
For the yen crosses, it is important to watch not only positive data from individual countries, but also whether the unwinding of yen-selling positions continues.
EUR/USD and GBP/USD
EUR/USD is being supported by dollar selling as U.S. yields decline. However, uncertainty surrounding France is also weighing on the pair, and resistance is emerging just below 1.1300.
For now, the pair is likely to trade in the 1.12s as markets assess whether dollar selling will continue.
GBP/USD is supported by expectations of tighter monetary policy following the previous day’s upside surprise in UK CPI. Although sterling is falling against the yen, it may remain relatively firm against the U.S. dollar.
However, if risk aversion intensifies further, demand for the dollar could also increase. Lower U.S. yields alone may not be enough to sustain gains in the euro and pound.
New Zealand CPI
New Zealand’s third-quarter CPI, released today, rose 0.7% quarter over quarter and 3.7% year over year.
The quarterly figure was below the market forecast of +0.8%, while the annual figure was below the forecast of +3.8%. Both measures also slowed from the previous readings.
Inflation easing more than expected is likely to temper expectations of further tightening by the Reserve Bank of New Zealand. Markets may also focus on the contrast with the hawkish stance signaled by the Reserve Bank of Australia the previous day, bringing the relative strength of the Australian and New Zealand dollars into focus.
However, broad risk aversion is also weighing on markets today, so the New Zealand dollar’s movement cannot be explained by CPI alone. A return to calmer trading in equities will also matter.
U.S. Economic Data
U.S. initial jobless claims are due at 13:30 tonight.
The market forecast is 201,000, compared with 199,000 previously, indicating a small increase.
A higher-than-expected result could strengthen concerns about a slowdown in the labor market, putting further pressure on U.S. yields and the dollar. A lower-than-expected figure could reinforce the view that the U.S. economy remains resilient and prompt buying in USD/JPY.
The U.S. Leading Economic Index is due at 15:00. It is expected to fall 0.2% month over month, following a 0.1% decline previously.
With equities falling and U.S. yields declining today, a run of weak data could amplify concerns about economic growth. After the releases, watch whether U.S. yields and equity prices point to the same market assessment.
Speeches and Events
The eurozone flash Consumer Confidence Index is due at 15:00. The market expects a reading of -17.0, down from -16.5 previously.
At 18:00, a $26 billion U.S. 5-year Treasury Inflation-Protected Securities auction is scheduled. The auction may provide insight into inflation concerns and the strength of demand for bonds.
The ECB has entered its blackout period for monetary policy communications today. The Fed is already in its own blackout period. With next week’s meetings approaching, economic data and market prices are more likely to provide clues than new policy comments.
Key Points for Overseas Markets
- Whether USD/JPY can find support around 156.77
- Whether the pair tests the September 30 low of 156.38
- Whether a rebound can recover 157 and the 157.30s
- Whether U.S. equities continue to fall during regular trading
- Whether the U.S. 10-year yield rebounds from around 5.08%
- Whether initial jobless claims exceed the forecast of 201,000
- Whether EUR/JPY can recover 176 and hold above it
- How Middle East headlines affect oil prices and market sentiment
Scenario Analysis
The main scenario is for risk-driven yen buying to continue, keeping USD/JPY and the yen crosses under pressure from selling on rallies.
If U.S. equities continue to fall and U.S. yields remain lower, USD/JPY may test 156.38. A break below that level could put 156.00 into view.
Conversely, if U.S. equities find support and yields recover, buying may emerge after the sharp decline. In that case, the key question will be whether USD/JPY can first recover 157 and then move above the 157.30s and hold there.
Do not assume that a single rebound marks the end of the decline. Confirm that improvement in equities and U.S. yields continues.
Summary
Today, yen strength has broadened after the market moved out of its recent range, taking USD/JPY below 157. Despite higher oil prices, U.S. yields have fallen, and risk aversion is driving the FX market more than inflation concerns.
The September 30 low of 156.38 is the key near-term downside reference. However, the decline has been rapid, so watch for a rebound if U.S. equities recover.
Tonight, the focus is on the U.S. data and whether the declines in equities and U.S. yields continue. These reactions will help determine whether yen strength can be sustained.
