The pair posted another negative close below the resistance barrier at 177.80, forming bearish waves while settling near 177.45, affected by stochastics’ attempt to exit overbought territory, allowing the pair to gather additional negative momentum in the current period.
The successful accumulation of bearish momentum reinforces our negative outlook, targeting 176.35 in the near term, reaching the next target near 175.75. However, a rise above the resistance barrier, accompanied by a positive close, would confirm the pair’s submission to the dominance of the bullish corrective trend. In this scenario, we would expect the price to pursue further gains, gradually advancing toward 178.60 and 179.40.
The expected trading range for today is between 176.35 and 177.80.
The Pound to US Dollar (GBP/USD) exchange rate moved higher on Tuesday after unexpectedly strong UK employment figures reinforced expectations that the Bank of England (BoE) will raise interest rates in November.
At the time of writing, GBP/USD was trading at around $1.3346, up approximately 0.3% from Tuesday’s opening levels.
Sterling found fresh support after the latest UK labour market report delivered a considerably stronger performance than economists had anticipated.
Figures from the Office for National Statistics (ONS) showed the unemployment rate fell from 4.9% to 4.7% in the three months to August, defying expectations for a broadly unchanged reading.
Employment also increased by 102,000, comfortably exceeding forecasts for a rise of just 20,000.
Wage growth provided further encouragement for Pound investors.
Regular earnings, excluding bonuses, accelerated from 3.6% to 3.7% year-on-year, suggesting that underlying pay pressures remain persistent despite earlier signs of a cooling labour market.
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The stronger figures reinforced expectations that the BoE will deliver another 25-basis-point interest rate increase at its November meeting.
With unemployment falling and wage growth remaining firm, policymakers may have less reason to delay further tightening, particularly while inflation continues to exceed the Bank’s 2% target.
The prospect of higher UK borrowing costs helped Sterling strengthen against several of its major counterparts.
The US Dollar (USD), meanwhile, struggled to attract demand on Tuesday as improving market sentiment reduced appetite for traditional safe-haven currencies.
Although oil prices remained elevated and concerns persisted over the possibility of renewed escalation in the Middle East, investors showed a greater willingness to hold riskier assets.
Expectations that the Federal Reserve could raise interest rates more gradually than previously anticipated also limited support for the ‘Greenback’.
US political developments added another source of uncertainty.
Recent polling suggesting stronger support for the Democrats ahead of the mid-term elections raised questions over whether President Donald Trump could face greater opposition to his legislative agenda.
However, the Dollar’s losses remained relatively contained as investors continued to monitor geopolitical risks and the outlook for US monetary policy.
Near-Term GBP/USD Forecast: UK Inflation Could Extend Sterling’s Gains
Wednesday’s UK consumer price index (CPI) release will provide the next major test for the Pound to US Dollar exchange rate.
Economists expect annual headline inflation to accelerate from 3.1% to 3.4% in September, adding to concerns that price pressures remain stubbornly elevated.
Following Tuesday’s stronger employment figures, an above-forecast inflation reading would strengthen the case for another Bank of England rate increase in November.
This could allow Sterling to build on its latest gains and challenge the $1.3400 level.
However, a softer inflation reading could temper expectations for further tightening and encourage some profit-taking following the Pound’s recent recovery.
For the US Dollar, the absence of major economic releases may leave broader market sentiment as the main influence on trading.
Renewed geopolitical tensions or a deterioration in risk appetite could revive demand for the safe-haven Dollar, potentially limiting GBP/USD’s upside.
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USD/JPY remains stuck near key resistance at 158.00 – 158.50 as traders focus on Treasury yield dynamics. The yield of 2-year Treasuries climbed towards the 4.79% level, while the yield of 10-year Treasuries pulled back towards 5.12%.
In case USD/JPY declines below the 158.00 level, it will head towards the 157.00 level. A move below 157.00 will open the way to the test of the support at 155.00 – 155.50. RSI is in the moderate territory, so there is plenty of room to gain downside momentum in case the right catalysts emerge.
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2026.10.20 2026.10.20 US Stock Market Trends Drive the Dollar. Forecast as of 20.10.2026
Dmitri Demidenkohttps://www.litefinance.org/blog/authors/dmitri-demidenko/
Before the release of US inflation data, the currency market reacted to movements in Brent crude prices. Rising oil prices were seen as a sign of accelerating inflation and higher Fed interest rates. This strengthened the US dollar. Now things are different. Let’s discuss this topic and make a trading plan for EUR/USD.
The article covers the following subjects:
Major Takeaways
European assets are being sold off.
France faces a major budget challenge.
The US dollar reacts to stock market movements.
Selling EURUSD if the price fails to break above 1.128, 1.13, or 1.134 remains a relevant strategy.
Weekly Fundamental Forecast for Dollar
US Treasury yields are rising because of a strong US economy and expectations that the Fed will continue tightening monetary policy. European bond yields are rising because of protests in France and other European countries. Is there a difference? Absolutely! And this difference raises doubts about whether the EUR/USD rally can last.
The yield spread between French and German bonds has reached a two-week high and is approaching the 15-year peak recorded in early October. To keep its debt at the current level of approximately 120% of GDP, France would have to achieve something remarkable: keep its budget deficit below 2% of GDP for several consecutive years. It has not managed to do so since the 1970s.
French-German Bond Yield Spread
Source: Bloomberg.
The government aims to reduce the budget deficit to 5% of GDP by cutting spending by €43 billion. However, voters oppose these measures. People are taking to the streets to protest against the rising cost of living. The wave of discontent is spreading beyond France to Italy, Portugal, Belgium, and other eurozone countries.
Protests are slowing economic activity and boosting support for right-wing parties willing to confront the EU, potentially even leaving the currency bloc. The euro faces a double blow from slower GDP growth and rising Frexit risk. It is no surprise that European assets are being sold off so quickly. Yet EUR/USD is not falling. It is actually trying to rise! A paradox?
In fact, it is not France but the US stock market that is setting the tone in Forex. The sell-off in technology stocks during the week ending October 16 gave way to a rebound at the start of the new trading week. Investors bought the dip and started selling Treasury bonds. Why seek safe-haven assets when the Nasdaq 100 is doing well?
US Treasury Yields and the Nasdaq 100
Source: Bloomberg.
As a result, Treasury yields rose, supporting the US dollar and helping it recover. EURUSD fell. Then the Nasdaq 100 stumbled, Treasury yields followed it lower, and the euro launched another counterattack.
Oil no longer drives the foreign exchange market. US stock indices and American exceptionalism now drive the Forex market. Under normal circumstances, a decline in the S&P 500 and weaker global risk appetite would be seen as a signal to buy the US dollar as a safe-haven currency. But not today.
In my view, fears surrounding technology giants and AI bubbles are overblown. Strong corporate earnings will renew interest in AI, push the Nasdaq 100 higher, and reassure US dollar bulls.
Weekly Trading Plan for EUR/USD
Thus, a failure to break above the resistance levels of 1.128, 1.13, or 1.134 would provide an opportunity to sell EUR/USD.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance broker. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2014/65/EU.
According to copyright law, this article is considered intellectual property, which includes a prohibition on copying and distributing it without consent.
The pair continued its corrective upward trading, reaching the resistance level at 211.20 and settling below it. We highlight the importance of monitoring price action at this stage and waiting for the close of the next four-hour candle to confirm the expected direction for the upcoming trading sessions.
Continued trading below the current resistance would increase the chances of renewed bearish attempts, with initial targets at 210.30 and 209.60, breaking above the resistance and holding there would give the pair an opportunity to launch a fresh bullish move, initially targeting 212.00 and 212.65.
The expected trading range for today is between 210.30 and 211.40
The pair has maintained its stability below the additional resistance barrier at 177.80, reaffirming its commitment to the previously suggested bearish scenario. The current sideways movement reflects continued conflicting signals from the main technical indicators. We therefore await further negative momentum to help the pair resume its bearish waves, targeting 176.35 and 175.75.
Conversely, a break above the current barrier and sustained trading above it would give the pair an opportunity to recover further losses, by rising gradually toward 178.60 and 179.40.
The expected trading range for today is between 176.35 and 177.80
Political turmoil in Europe, and France in particular, is continuing to trouble traders, Reuters reported on Monday. France’s 10-year bond yield approached 5% this month, hitting its highest level since 2002. As of the end of the second quarter, public debt was 119% of France’s GDP. The ECB and euro zone finance ministers have urged France to pass its budget for 2027 in a bid to calm bond markets. Because France is going through an excessive deficit procedure, it is not eligible for the ECB’s tools to stabilize financial markets.
Pound: Jobs Data Back the Hike Case
According to data released this morning by the Office for National Statistics, UK unemployment for the period between June and August was 4.7%. That is the lowest it has been in a year. While payroll employees did increase, by about 13,000 in September, they are still down about 66,000 on the year. There were other weaker indicators. Vacancies dropped to 691,000, the lowest since 2021, during the pandemic, and total pay growth for the same period slowed to 3.7% from 3.9%. With pay still growing faster than inflation, real wages are still rising, which should support the case for a November rate hike. Wednesday’s CPI should show if inflation has kept increasing.
The EURUSD pair declined in its latest intraday trading, attempting to find a higher low that could serve as a base for regaining the positive momentum needed to resume its recovery. Leaning on EMA50’s support, while the relative strength indicators reached deeply oversold territory relative to the pair’s price action. This increases the likelihood of a recovery in the near term, affected by breaching a main short-term bearish trend line.
The Pound to US Dollar (GBP/USD) exchange rate made little headway at the start of the week, with investors reluctant to take significant positions ahead of several important UK economic releases.
At the time of writing, GBP/USD was trading at approximately $1.3321, broadly unchanged from Monday’s opening levels.
Sterling struggled to find a clear direction on Monday as investors looked ahead to a busy week for UK economic data.
Tuesday’s labour market report and Wednesday’s inflation figures are expected to be particularly important, with both likely to influence expectations for the Bank of England’s (BoE) next interest rate decision.
As the final employment and consumer price index (CPI) readings before November’s policy meeting, the figures could help determine whether the BoE delivers another 25-basis-point rate increase next month.
Evidence of persistent inflation or resilient wage growth would strengthen the case for further tightening, while signs that the economy is cooling could make policymakers more reluctant to raise borrowing costs.
With the outlook finely balanced, Sterling traders appeared unwilling to make significant moves ahead of the releases.
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The US Dollar (USD), meanwhile, faced some pressure on Monday as continued concerns over the recent sell-off in artificial intelligence (AI) stocks weighed on sentiment towards US assets.
Investors have become increasingly concerned about whether the enormous sums being invested in AI infrastructure will generate sufficient returns.
Questions have also emerged over how heavily indebted data-centre operators will finance their expansion plans, particularly if borrowing costs remain elevated.
The uncertainty has added to doubts over whether the Federal Reserve will continue raising interest rates.
Some investors believe further tightening could put additional strain on the technology sector, which has become an increasingly important source of investment and growth in the US economy.
These concerns helped limit demand for the Dollar, although the currency avoided more substantial losses.
Near-Term GBP/USD Forecast: UK Jobs Data Could Test Sterling’s Recovery
Tuesday’s UK employment figures could provide the first major test for the Pound to US Dollar exchange rate this week.
Economists expect the latest report to show unemployment increased again in the three months to August, while wage growth is forecast to have slowed.
A weaker labour market would reduce pressure on the Bank of England to raise interest rates in November, potentially leaving Sterling vulnerable to renewed selling.
However, stronger-than-expected employment or earnings figures could reinforce expectations of another rate increase and help GBP/USD build on its recent recovery.
Across the Atlantic, the latest weekly ADP employment figures may also influence trading.
Evidence of continued resilience in US private-sector hiring could offer the Dollar some support by strengthening expectations that the Federal Reserve has room to maintain a restrictive policy stance.
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U.S. Dollar Index gains ground as traders focus on the situation in Europe. In France, protests drew more than half a million people on Saturday. The situation deteriorated quickly, and protests turned into rioting and looting. Italy and several other European countries have also suffered from violent protests over the weekend.
In the U.S., traders focused on NAHB Housing Market Index report. The report indicated that NAHB Housing Market index decreased from 32 in September to 29 in October, compared to analyst forecast of 32.
