**US Dollar Price Action Setups: EUR/USD, GBP/USD, USD/JPY (January 6, 2026)**
*By James Stanley, originally published on Forex.com*
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**Overview**
The first week of 2026 has kicked off with volatility, as US Dollar (USD) price action continues to shape key trends in the major FX markets. Traders have witnessed significant swings in EUR/USD, GBP/USD, and USD/JPY amid shifting expectations surrounding US monetary policy, evolving risk sentiment, and technical dynamics. This analysis dives into the prevailing setups for these pairs, crucial technical levels, and strategies to watch as we move deeper into the new year.
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**US Dollar Index (DXY): Foundation for Major Pairs**
The US Dollar Index holds vast influence over major currency pairs. In the early days of 2026, DXY has staged a strong move off multi-week lows, finding support on the back of robust economic data and relatively hawkish commentary from Federal Reserve officials.
**Support and Resistance Levels for DXY:**
– **Support:** 101.50 (post-holiday swing low), then 100.80 (key psychological mark)
– **Resistance:** 103.25 (recent top), followed by 104.10 (2025 late year high)
**Insights for Traders:**
– DXY’s gains are favoring US Dollar bulls, especially with softer risk appetite.
– Upcoming US inflation and employment data will further shape the USD’s near-term trajectory.
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**EUR/USD: Bounce or Breakdown?**
The Euro’s relationship with the Greenback remains a defining feature for forex markets. EUR/USD rallied impressively in Q4 2025 but has struggled to maintain momentum as risk aversion returns and the US economy displays relative resilience.
**Technical Outlook:**
– **Resistance:** 1.1000 (psychological), 1.1075 (Q4 2025 top)
– **Support:** 1.0850 (recent swing low), 1.0780 (December pivot)
**Chart Patterns and Signals:**
– The pair put in a bearish engulfing pattern to start the year, pointing to downside pressure.
– Daily RSI signals a move from overbought to neutral, sapping bullish momentum.
– 1.0950-1.1000 has proven a stubborn ceiling for upward movement.
**Key Factors in Play:**
– **ECB/Fed Policy Divergence:** The ECB is projected to remain less hawkish compared to its US counterpart in the first half of 2026. Speculation over the Fed’s next move (pause or further tightening) will shape Euro direction.
– **Geopolitics and Energy Prices:** European energy dynamics and geopolitical events in the region remain important background factors, influencing Euro sensitivity to risk sentiment.
– **Economic Data:** Eurozone inflation, unemployment, and industrial production releases are in focus.
**EUR/USD Possible Scenarios:**
– A sustained break below 1.0850 exposes 1.0780 and possibly further decline towards 1.0700 support.
– Recovery above 1.1000 reopens the path to 1.1100, but requires improving Eurozone data or US Dollar weakness.
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**GBP/USD: Range Play with a Bearish Bias**
Sterling started 2026 with mixed signals. The Bank of England’s cautious stance and persistent UK inflation provided some support, but the global shift to risk-off and USD resurgence have pressured GBP/USD.
**Technical Levels:**
– **Resistance:** 1.2775 (December swing high), 1.2850 (multi-month top)
– **Support:** 1.2600 (trendline), 1.2500 (psychological)
**Price Action Highlights:**
– The pair has carved a lower high below 1.2800, warning of waning bullish momentum.
– GBP/USD recently broke below a rising trendline from Q4 2025,
Read more on GBP/USD trading.