1. FX Outlook
  2. Daily FX Report

EUR / USD

The EUR/USD pair finds itself at a critical juncture, with the Federal Reserve's dovish stance contrasting sharply against the ECB's more hawkish position on monetary policy. Technical analysis reveals the currency pair is trading in a consolidated range between the 20-day SMA at 1.16 and the 50-day SMA at 1.17, maintaining position above the significant 200-day moving average at 1.14.

The Fed's anticipated rate cuts, with markets pricing in a 99% probability of a 25bp reduction at the October meeting, could potentially weaken the dollar, while the ECB's continued hawkish stance amid sticky core inflation in the Eurozone provides underlying support for the euro. The technical picture suggests neutral momentum with an RSI of 44.61, though the pair's positioning above key moving averages maintains a slightly constructive outlook.

A resolution to the current range-bound trading could emerge through either a breakthrough above the 50-day SMA targeting 1.187, or a breakdown below the 20-day SMA testing support at 1.155, with the direction likely to be determined by upcoming US CPI data and developments in Eurozone consumer confidence.

USD / JPY

The USD/JPY pair continues to show strength, trading well above all major moving averages with robust technical indicators supporting the upward momentum. Japan's political landscape under Prime Minister Sanae Takaichi is exerting considerable pressure on the yen, with her dovish monetary stance and planned fiscal stimulus package exceeding $90 billion dampening expectations for near-term rate hikes.

The persistence of Japan's core inflation at 2.9% in September, despite being above the Bank of Japan's 2% target, has not prompted policy tightening, particularly given the new administration's preference for accommodative measures. The carry trade dynamic remains a crucial factor, with Japan's low interest rates making the yen an attractive funding currency against higher-yielding alternatives.

Technical analysis reveals strong momentum with an RSI reading of 63.2, suggesting potential for further upside without entering overbought territory, while the 30-day VWAP at 150.13 provides significant support. The immediate outlook appears bullish with potential to test resistance at 153.18, though this remains contingent on maintaining positions above the 20-day SMA at 150.78.

GBP / USD

The GBP/USD pair is experiencing significant pressure as UK Business Optimism data deteriorated to -31 from -27, indicating growing corporate sector pessimism and weighing heavily on sterling sentiment. The anticipated Federal Reserve rate cut of 25 basis points is creating additional complexity in the pair's dynamics, while technical indicators reveal bearish momentum with the currency trading below critical moving averages.

The pair has found temporary support at 1.331, though the RSI reading of 40.61 suggests mounting negative sentiment, and the combination of UK economic uncertainty and evolving US monetary policy expectations continues to drive volatility. Bank of England rate-setter Swati Dhingra's observations about US tariffs impacting Britain's economy add another layer of complexity to the currency pair's outlook, although the pound has demonstrated notable resilience against the dollar over the past two years.

Despite current headwinds, a potential bullish reversal could materialize if buyers successfully breach the immediate resistance at 1.338, while a bearish scenario might see the pair testing support at 1.326, with a possible acceleration toward the 200-day moving average at 1.34.

Economic Calendar

24102025

Contents

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