Today’s Market Outlook
October 26, 2026
USD/JPY Rebounds Ahead of Policy Meetings; Watch Resistance in the Mid-157s
Market Overview
The week has begun with cautious trading as markets look ahead to a series of central bank meetings and major U.S. data releases later this week.
USD/JPY has recovered from the yen’s gains late last week, rising to 157.37 in the London session. GBP/USD and other pairs have also moved in a dollar-positive direction, suggesting that the move reflects a broader dollar rebound as well as reduced yen buying.
However, USD/JPY remains below key moving averages, so a return to an uptrend has not been confirmed. Whether the pair can break through selling pressure from the mid-157s toward 158 will be an important test of the rebound’s staying power.
This week brings the FOMC, the Bank of Japan and the ECB meetings, as well as U.S. GDP and PCE inflation data and earnings from major technology companies. Directional moves may be limited early in the week, but markets are likely to remain sensitive to changes in equities and yields.
USD/JPY
USD/JPY edged higher in the London session, reaching a high of around 157.37.
The pair fell from the 158s into the 156s late last week, but yen buying has eased for now. Still, selling interest is evident between 157.50 and 158, so the rebound’s continuation should be assessed cautiously.
To the upside, the Ichimoku conversion line at 157.52 and the baseline around 157.56 form the first resistance zone. A break above this area would bring the 10-day moving average at 157.80, the 21-day moving average at 157.85 and then 158 into focus.
To the downside, the immediate question is whether the pair can hold 157. If it falls below that level, the mid-156s may come into view. Further down, last week’s low near 156.08 and the Ichimoku cloud’s lower boundary around 156.07 are important levels.
For now, USD/JPY is likely to trade around 157. Watch whether gains continue to be capped in the mid-157s.
Central Bank Meetings and Key U.S. Data
Monetary policy events across Japan, the United States and Europe are scheduled this week.
In addition to the rate decisions, markets will focus on how far central banks go in explaining their future policy stance. Even if a decision is in line with expectations, the accompanying statement or press conference could shift the direction of currencies.
In the United States, the preliminary third-quarter GDP estimate and September PCE price index will also be released.
Resilient growth and persistent price pressures could support higher U.S. yields and dollar buying. Conversely, signs of slowing growth or easing inflation could limit the dollar’s gains.
With major catalysts concentrated later in the week, avoid treating today’s rebound as confirmation of a trend reversal. The key is whether the move continues after the events.
Equity Markets and Major Corporate Earnings
Concerns about investment in AI-related businesses, which contributed to yen strength last week, remain important.
Earnings from Alphabet, Microsoft and Amazon are due this week. Markets will be watching not only revenue and profits but also the scale of capital spending and whether that investment is generating returns.
If results and guidance meet market expectations, concerns about technology stocks could ease, potentially supporting a recovery in USD/JPY and the yen crosses.
On the other hand, concerns about rising investment costs or slowing growth could renew yen buying driven by falling equities, as seen last week.
When assessing USD/JPY, it is important to separate the dollar’s broader strength from yen-specific moves triggered by equity markets.
Euro and France’s Credit Rating
The euro has found some support after France avoided another downgrade.
Moody’s affirmed France’s rating at Aa3 last Friday. The outlook remains negative, but reduced concern about a further downgrade has helped narrow the yield spread between French and German government bonds.
However, France’s fiscal and political problems have not been resolved. This is a supportive factor for the euro, but whether it can lead to a sustained rally will also depend on future fiscal policy and the ECB’s stance.
EUR/USD is likely to see buying and selling pressure meet around 1.1200.
German Ifo Business Climate Index
Germany’s Ifo Business Climate Index for October, released today, came in above market expectations.
Following the release, EUR/USD strengthened into the 1.1210s, while EUR/JPY briefly rose to around 176.36, setting a new high for the day.
Reduced concern about France’s credit rating, along with signs of resilience in German business sentiment, has supported the euro. However, dollar buying has also emerged in the London session, which may limit further gains in EUR/USD.
For EUR/JPY, watch whether the pair can hold above 176 and continue rising through the area around 176.36.
Sterling and the Autumn Budget
Sterling is struggling to advance ahead of the UK’s Autumn Budget this week.
In the London session, GBP/USD came under pressure from dollar buying and briefly fell to around 1.3342. This week, sterling is likely to be influenced not only by monetary policy expectations but also by the market’s assessment of the government’s fiscal plans.
If the government earns confidence in its path toward fiscal sustainability, the pound could find support. If concerns about a widening budget deficit intensify, sterling may come under selling pressure.
For GBP/USD, 1.3300 is a near-term downside level to watch. On a rebound, the key question is whether the pair can recover 1.3400.
GBP/JPY is expected to trade around 210, but a combination of UK-specific concerns and renewed risk-aversion-driven yen buying could put the pair under pressure.
Australian Dollar and Inflation Concerns
RBA Assistant Governor Hunter said that although the central bank has raised rates, its response to inflation is not yet complete.
He also noted that higher oil prices caused by conflict are affecting supply chains, reinforcing the RBA’s tightening stance.
Interest rate expectations are a source of support for the Australian dollar. However, renewed instability in equity markets could lead to selling driven by risk aversion.
Alongside policy expectations, watch this week’s Australian inflation data and the global equity-market response.
Options Market and Event Risk
One-week implied volatility for USD/JPY is 8.73%, above the one-month figure of 7.85%.
The higher short-term volatility reflects concern about price swings around this week’s policy meetings and major data releases.
Even if trading is subdued for now, price movements may change after the events. Treat the early-week range separately from market conditions after the late-week announcements.
Tonight’s Events
There are few high-profile U.S. economic releases today, so U.S. yields and equity markets are likely to provide the main trading cues.
A $69 billion U.S. two-year Treasury auction is scheduled for 18:00 London time on October 26.
Strong demand could push yields lower and weigh on the dollar, while weak demand could lift yields and support dollar buying. With the FOMC approaching, watch whether the market reaction continues after the auction.
The Fed and ECB are in their blackout periods for policy-related comments. Market prices are therefore likely to matter more than new policy statements.
Key Points to Watch in Overseas Trading
- Whether USD/JPY can hold in the 157s
- Whether it can break through resistance at 157.52–157.56
- Whether selling intensifies around 157.80–158
- Whether stable U.S. equities reduce demand for the yen
- How yields and the dollar respond after the U.S. two-year Treasury auction
- Whether EUR/JPY can hold above 176
- Whether GBP/USD falls toward 1.3300
- Headlines related to the UK Autumn Budget
- Developments in the Middle East and oil prices
Scenarios
The base case is for USD/JPY to trade around 157 ahead of the policy meetings, with selling around the mid-157s through 158 tested on any rebound.
If U.S. equities stabilize and yields rise, USD/JPY could break above around 157.56 and rebound toward 158.
Conversely, if concerns about AI-related stocks return and U.S. yields fall, the pair could break below 157 and retreat into the 156s. In that case, whether it can hold near last week’s low around 156.08 will be important.
Summary
USD/JPY has rebounded to 157.37 at the start of the week, but it remains below key moving averages. The move still looks partly like a recovery from last week’s decline.
The euro is supported by France’s unchanged credit rating and a stronger German Ifo reading, while sterling remains capped by concerns about the UK Autumn Budget.
Tonight, watch whether USD/JPY can break through resistance in the mid-157s and whether U.S. yields and equities confirm the rebound. Ahead of this week’s major events, trading is likely to focus on the range and differences in strength between currencies.
