**Weekly Forex Forecast: December 28, 2025 – January 2, 2026**
*Adapted and expanded from a forecast by Adam Lemon for DailyForex.com, with additional analysis for a broader perspective on the upcoming trading week.*
As traders look ahead to the week of December 28, 2025, to January 2, 2026, the Forex market presents a unique set of challenges and opportunities. The period intersects with the New Year, resulting in reduced liquidity and thinner trading volumes. Price movements may become more volatile and less predictable, especially as many institutional players are on year-end breaks. However, this time frame can also give rise to corrective moves or false breakouts, offering savvy traders the chance to reset strategies as the year closes and a new one begins.
**Market Overview and Key Themes**
– **Reduced Liquidity:** The last week of the year is notorious for low volumes, which often leads to increased spreads and unexpected price swings. Traders are advised to exercise heightened caution, adjust position sizes, and consider using tighter stops if engaging in the market.
– **Holiday Effects:** With major financial centers operating on limited hours or closed entirely, traditional market flows are disrupted. Technical signals may be less reliable.
– **Position Squaring:** Many funds and trading desks close out positions to tidy their books ahead of year-end reporting, causing unusual price action.
– **Macro Backdrop:** Throughout December, 2025, central banks held a cautious stance, with inflation and global growth concerns tempering hawkish monetary policy. The upcoming week may not deliver new fundamental drivers, but developments could set the tone for January’s full-throttle trading.
**Major Currency Pair Analysis**
*The following analysis draws from DailyForex’s Adam Lemon and is supplemented with insights from recent institutional research and economic forecasts.*
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### EUR/USD: Range-Bound with Downward Bias
– **Recent Action:** The euro has attempted to stabilize above the 1.0900 level against the US dollar in December, rebounding from periodic lows but meeting stiff resistance around 1.1000.
– **Technical Signals:**
– The pair remains entrenched within a long-term sideways channel.
– Daily momentum oscillators are pointing toward a mild bearish divergence.
– Support seen near 1.0850 and 1.0780; resistance looms at 1.1000 and 1.1040.
– **Fundamental Drivers:**
– The European Central Bank’s commitment to data dependency has kept hawkish bets subdued.
– The Federal Reserve’s guidance suggests policy may stay restrictive through the start of 2026, lending ongoing support to the dollar.
– **Trading Outlook:**
– Expect EUR/USD to remain somewhat rangebound, with risk to the downside if US economic data continues to outperform European releases early in the new year.
– Short-term traders might seek opportunities to fade rallies toward resistance, especially during low-liquidity, high-vol
Read more on AUD/USD trading.