**Weekly Forex Forecast: December 28, 2025 – January 2, 2026**
*Based on original work by Christopher Lewis, adapted and expanded.*
The end of the year often brings heightened volatility and surprising price action to the forex market, and this week is no exception. As 2025 winds down, market participants juggle light trading volumes, year-end profit-taking, and the anticipation of new macroeconomic trends that may shape the start of 2026. This creates both opportunities and challenges for traders seeking to position themselves ahead of potential moves.
This comprehensive weekly forecast presents an in-depth analysis and technical perspective on major currency pairs: EUR/USD, GBP/USD, USD/JPY, AUD/USD, and additional insight from external sources to provide context for likely market dynamics.
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## Key Themes for the Week
– **Holiday Liquidity:** Expect thin market conditions due to holidays in major global centers. Lower liquidity can exaggerate price swings, leading to sudden spikes or drops. Market participants should exercise additional caution, as stop-loss hunting and erratic movements are common.
– **Year-End Flows:** Institutional funds and large traders frequently adjust portfolios or repatriate funds at year’s end. This can create irregular moves that are not necessarily tied to news flow or technical formations.
– **Anticipation of 2026 Macro Trends:** Traders are already looking to central bank policies for 2026. Even subtle shifts in tone or forecasts from the Federal Reserve, European Central Bank, or Bank of Japan could trigger re-pricing in currency markets.
– **US Dollar Dynamics:** The US dollar remains the world’s reserve currency, and its future path is central to the forex market. Upcoming US data, projections for interest rates, and global risk appetite will all impact its performance.
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### EUR/USD: Awaiting a Post-Holiday Breakout
The EUR/USD pair enters the final week of 2025 oscillating within a familiar trading range. The key question is whether the pair can decisively break out as traders prepare for possible shifts in ECB and Federal Reserve policy in the early months of 2026.
#### Technical Analysis
– **Support and Resistance:**
– Key support sits near the 1.0850 level. A sustained drop below this area could open the door toward 1.0750.
– Immediate resistance can be found around 1.1020, with a further barrier higher at 1.1100.
– **Moving Averages:**
– The 50-day and 200-day moving averages are converging, suggesting upcoming volatility or a possible trend change.
– **Indicators:**
– Relative Strength Index (RSI) remains neutral; there is little sign of overbought or oversold conditions at the current time.
#### Fundamental Factors
– **ECB Outlook:** The European Central Bank has signaled patience with rate moves, highlighting persistent but easing inflation. Markets await clarity on the bank’s 2026 stance during the first quarter
Read more on AUD/USD trading.