**Forex Weekly Technical Outlook: December 21–26, 2025**
*Adapted and expanded from the original article by DailyForex.*
As forex markets approach the Christmas holiday period, liquidity traditionally begins to thin out. Nevertheless, the week of December 21 to December 26, 2025, may still present select opportunities for traders keeping a close eye on technical patterns, key support-resistance levels, and market sentiment. This extended analysis aims to provide a deeper outlook on major currency pairs, with a technical focus on the U.S. Dollar Index (DXY), EUR/USD, GBP/USD, USD/JPY, and other commonly traded pairs. Additionally, considerations are made for macroeconomic fundamentals and recent sentiment across global markets.
Please note that due to the upcoming holidays, trading activity will decrease, which may lead to erratic price movements or fake breakouts.
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## Key Themes This Week
– Overall U.S. dollar strength remains intact amid economic resilience in the U.S.
– Risk sentiment is fragile given geopolitical tensions and declining market participation.
– Central bank divergence continues to support dollar bullishness, though some pairs may show consolidation due to low volume.
– Traders should remain cautious with position sizing and avoid overleveraging in low-liquidity conditions.
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## U.S. Dollar Index (DXY)
The U.S. Dollar Index began showing signs of renewed strength last week, rebounding off key support levels and turning upward. With resilient economic prints and persistent inflation concerns rallying expectations for the Federal Reserve to stay on hold longer than other central banks, the greenback closed on a bullish note.
– Technical Overview:
– Immediate resistance: 104.50
– Next key resistance: 105.20
– Immediate support: 103.20
– Bias: Bullish short-term outlook remains valid while above 103.00
– RSI is climbing above the midline (50), suggesting strengthening bullish momentum.
– Price structure shows a breakout from a descending channel, supportive of further upside continuation.
Market participants should continue monitoring U.S. core inflation data and any Fed speakers post-rate decision.
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## EUR/USD
The EUR/USD pair has remained in a corrective downtrend for much of December 2025, pressured by divergence in ECB-Fed policy outlooks. While the European Central Bank remains more cautious and slower in initiating rate tightening (or in some cases, discussing rate cuts), the dollar capitalizes on the growing yield spread in its favor.
– Price has broken below the critical support level of 1.0850, turning the short-term outlook bearish.
– Immediate support zone lies between 1.0720–1.0750, a historically significant demand area.
– Short-term resistance lies at 1.0850 and 1.0930
– RSI is trending below 50, reinforcing the bearish grip.
A breach below 1.0720 could accelerate declines toward 1.0650. However, if price reclaims 1.0850 convincingly, a retracement to 1.0930 is likely. Fundamental risks this week include any unanticipated remarks from ECB President Christine Lagarde or updated German economic data.
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## GBP/USD
GBP/USD has also come under consistent selling pressure, as the market grows cautious over the UK’s economic outlook. With inflation easing and GDP growth underwhelming, the Bank of England may be closer to easing in 2026 than previously expected, which is weakening the pound.
– Technical levels:
– Strong support lies around 1.2600
– Next target below is 1.2530
– Resistance: 1.2750 and 1.2830
– Price action has created lower highs and lower lows in recent sessions, confirming a bearish short-term market structure.
– 50-period moving average on the 4-hour chart has crossed below the 200-period moving average (a bearish crossover).
Short-term traders may want
Read more on USD/CAD trading.