Forex Technical Outlook: Currency Pairs to Watch (December 28, 2025 – January 2, 2026)
Original article by: Mahmoud Abdallah, DailyForex
As we move into the final trading days of 2025 and transition into 2026, forex traders are keenly observing price movements, technical indicators, and macroeconomic factors that could influence key currency pairs. This time of year is known for reduced market liquidity due to the holiday season, which often leads to choppy or erratic price action. Nonetheless, for those closely monitoring the markets, these conditions may present unique opportunities heading into the new year.
Below is an in-depth technical and strategic analysis of major forex pairs to watch during the week of December 28, 2025, through January 2, 2026. We also incorporate broader market sentiment trends and economic data to help traders better position themselves for early 2026.
EUR/USD: Holding Range as Market Awaits New Catalysts
The EUR/USD pair has been trading within a relatively tight range heading into the new year. This consolidation reflects uncertainty among traders regarding the direction of monetary policy from both the European Central Bank (ECB) and the U.S. Federal Reserve.
Key Details:
– Current price level: As of December 27, 2025, the pair is trading between 1.0950 and 1.1050.
– Support levels: 1.0950 and 1.0890
– Resistance levels: 1.1055 and 1.1120
Technical Outlook:
– The pair is trading above its 50-day simple moving average (SMA), indicating modest bullish momentum.
– Relative Strength Index (RSI) remains near the neutral 50 mark, suggesting a lack of directional commitment.
– MACD (Moving Average Convergence Divergence) is showing early signs of a bullish crossover but lacks strong momentum.
Fundamental Factors Influencing EUR/USD:
– The ECB has recently signaled that it expects to hold rates steady at current levels through the early part of 2026.
– Meanwhile, the U.S. Fed remains non-committal about rate cuts, making inflation and employment data in January key factors.
– German inflation and Eurozone manufacturing PMIs early in 2026 will be closely watched for clues on economic stability.
Outlook:
Unless the pair breaks consistently above 1.1120 or below 1.0890, range-bound trading is expected to continue. A breakout in early January would likely signal a trend for Q1 2026.
GBP/USD: Traders Eye Data for Policy Direction
Sterling has shown relative resilience against the dollar, with the GBP/USD pair finding consistent buying interest near the 1.2600 level. However, political uncertainty in the UK and upcoming Bank of England (BoE) policy meetings are keeping traders cautious.
Price Snapshot:
– Current price range: 1.2650 to 1.2780
– Key support levels: 1.2600 and 1.2530
– Resistance points: 1.2750 and 1.2850
Technical Trends:
– The RSI is hovering around 55, giving the pair a slightly bullish bias.
– Price remains above the 100-day SMA.
– A potential golden cross formation between the 50-day and 200-day SMAs is developing, which may encourage long trades entering 2026.
Fundamentals to Monitor:
– UK GDP growth for Q4 2025 and December PMI figures could shape January’s expectations.
– Inflation in Britain has remained stubbornly above the BoE’s 2 percent target, raising speculation about rate hikes.
Strategy Implication:
Should GBP/USD break above the 1.2850 resistance, it may signal strong bullish momentum into Q1 2026. Conversely, a fall below 1.2530 could open doors to a short-term bearish correction.
USD/JPY: Bullish
Read more on USD/CAD trading.