October 26th Chart of the Week: Central Bank Rate Decisions Loom as EUR/USD Tests Key Support

• Central bank rate decisions from RBNZ, BOC, FOMC, ECB, and BOJ are scheduled for this week, with RBA and BOE following next week.
• The emergence of divergent inflation trends and energy exposures may drive distinct monetary policy paths across major central banks.
• EUR/USD remains sensitive to relative policy expectations between the Fed and the ECB, with key technical support near 1.1170.

Five major central banks—the RBNZ, BOC, FOMC, ECB, and BOJ—are set to deliver interest rate decisions this week, with RBA and BOE meetings slated for next week.¹ This cluster of central bank announcements comes at a critical juncture, marked by persistent inflation, broader economic growth concerns, and elevated energy costs, which are driving underlying price pressures amid ongoing geopolitical tensions.

While global market sentiment is often anchored by the Federal Reserve, varying macroeconomic conditions and domestic energy exposures are affecting regional inflation paths differently, laying the groundwork for divergent monetary policy approaches.

These diverging monetary policy paths have the potential to drive noticeable price movements across multiple currency pairs by shifting interest rate differentials. While US dollar yields have remained particularly appealing over the past several years and have bolstered greenback strength, shifting yield spreads are now affecting major pairs individually. USD/JPY remains anchored by significant rate differentials and ongoing carry-trade activity, while CAD’s correlation to oil keeps it vulnerable to softness in energy prices and to relative policy easing, if needed, to stimulate the economy. Meanwhile, EUR/USD sensitivity pivots on whether markets price in Federal Reserve rate decisions faster than ECB policy shifts.

Throughout October 2026, the market probability for a Federal Reserve target interest rate range of 3.75%–4.00% at the October 28 meeting shifted dramatically, surging from a low near 30% early in the month to nearly 90% by October 25. This steep rise was primarily catalyzed by key economic data releases—including the September Nonfarm Payrolls² and CPI³/PPI⁴ inflation reports—which demonstrated both labor market stability and steady disinflation.

These prints effectively ruled out near-term emergency policy moves, steering market expectations toward the December 9 FOMC meeting, where the CME FedWatch tool indicates a 74.0% probability of a 25 bps rate hike.

The Eurozone economy in late 2026 is defined by a delicate balance between modest economic resilience and reignited inflationary pressures. Growth remains positive but subdued, with real GDP expanding by around 0.8% to 1.0% year-on-year⁵ and solid labor market conditions⁶. However, headline inflation has accelerated significantly in the second half of the year—reaching 3.8% in September, driven largely by elevated energy prices⁷ and geopolitical supply disruptions—pushing inflation well above the European Central Bank’s 2.0% medium-term target.

This unexpected rebound in inflation halted the prior monetary easing cycle and prompted the ECB to resume interest rate hikes, bringing the deposit facility rate to 2.50% by September⁸, with markets bracing for further monetary tightening heading into year-end to prevent price pressures from becoming entrenched.

According to market-implied probabilities from ECB Watch as of October 26, 2026, the European Central Bank is expected to maintain its current deposit facility rate of 2.50% in the immediate term, then deliver a 25-basis-point interest rate hike before year-end. For the imminent October 29, 2026 meeting, markets are pricing in an overwhelming 97.0% probability that rates remain unchanged at 2.50%, with only a negligible 3.0% chance of an increase to 2.75%.

The outlook shifts decisively for the final meeting of the year on December 17, 2026, where a 75.4% probability is assigned to a rate hike bringing the deposit rate up to 2.75%, while the likelihood of holding at 2.50% falls to 22.3% and a larger move to 3.00% sits at just 2.3%.⁸

• On the daily EUR/USD chart, price action has been trading within a widening formation—demarcated by the blue lines—following a break below the uptrend that originally started in March 2025 and ended in July 2025.
• In January 2026, price action attempted to form an inverted complex head-and-shoulders pattern, as indicated by the blue arcs and red neckline. A breakout above the neckline occurred following the release of the FOMC meeting minutes on Wednesday, August 19, 2026. However, after forming a double top above the neckline a few days later, price action lost upward momentum, pulled back toward the lower boundary of the widening formation, and ultimately broke below it on October 1, 2026.
• Following the breakdown, price action continued its downward trend, breaching the annual pivot point of 1.1280 and reaching lows near 1.1100. An exhaustion gap is visible between 1.1180 and 1.1205, which is currently offering support as price action attempts to stabilize above the weekly S1 at 1.1170.
• Directly above price action is a confluence of resistance formed by the monthly S1 (1.1209), the weekly pivot point (1.1215), and the 9-day EMA and SMA, which is just below the 21-day SMA. A secondary resistance zone lies higher up, defined by the lower blue trendline of the broken widening formation, the weekly R1 at 1.1326, and the annual pivot point at 1.1280.
• Momentum indicators remain aligned with price action: the RSI is at 36, approaching oversold territory at 30, while the Stochastic indicator holds at neutral levels, with the %K line positioned just below the %D line.

In summary, the impending wave of central bank interest rate decisions underscores a pivotal shift toward monetary policy divergence across major economies. While the Federal Reserve’s path is closely tied to stabilizing inflation and labor market resilience, the ECB faces renewed price pressures, keeping further tightening firmly on the table. For EUR/USD, this fundamental backdrop interacts with a technical structure testing key support levels near 1.1170.

A sustained break below this area could open the door to further downside toward 1.1100, whereas a bullish rebound above the immediate resistance confluence at 1.1209–1.1215 would be required to shift short-term momentum back in favor of the euro.

Abbreviation list

RBA: Reserve Bank of Australia

BOC: Bank of Canada

FOMC: Federal Open Market Committee

BOJ: Bank of Japan

BOE: Bank of England

RBNZ: Reserve Bank of New Zealand

ECB: European Central Bank

EMA: Exponential moving average

SMA: Simple moving average

RSI: Relative strength index

% K: Fast stochastic

% D: Slow stochastic

MACD: Moving average convergence divergence

Pivot point: PP

Support: S

Resistance: R

Footnotes

¹ - https://www.bloomberg.com/markets/economic-calendar

² - https://www.bls.gov/opub/ted/2026/nonfarm-employment-little-changed-in-september-2026.htm

³ - https://www.bls.gov/news.release/pdf/cpi.pdf

⁴ - https://www.bls.gov/ppi/

⁵ - https://www.ecb.europa.eu/press/pr/date/2026/html/ecb.mp260910~314e508016.en.html

⁶ - https://ec.europa.eu/eurostat/home

⁷ - https://ec.europa.eu/eurostat/home

⁸ - https://ecb-watch.eu/