Title: Forex Market Outlook: Key Pairs to Watch (28 December 2025 – 02 January 2026)
Original article authored by: DailyForex.com Analysts
As 2025 draws to a close and traders gear up for the first trading week of 2026, the foreign exchange market shows signs of increased volatility and key technical developments. With major economic releases poised to influence global currencies, and holiday-thinned liquidity impacting price action, traders must pay close attention to critical levels and indicators to position themselves advantageously.
This analysis outlines the technical and fundamental outlook for several major forex pairs for the trading week from 28 December 2025 to 02 January 2026, focusing on underlying trends, support and resistance zones, and moving average signals.
EUR/USD – Bearish Momentum Faces Resistance at Key Levels
The EUR/USD pair remains in a technical downtrend, although recent price action suggests a potential pause in bearish momentum.
– The pair is hovering near the 1.0900 area, which serves as both a psychological and technical inflection point.
– Trading below the 50-day and 200-day moving averages implies continued downside bias.
– RSI (Relative Strength Index) remains below the 50 level, underscoring bearish market conditions.
– Should the pair stay below the key 1.0950 level, the next downside targets include 1.0820 and 1.0775.
– A strong break above 1.0950, however, could shift momentum, opening the door for a retest of 1.1025 and 1.1100.
From a fundamental standpoint, traders are looking to upcoming Eurozone inflation figures and U.S. jobless claims data, both of which could provide clarity on the future direction of interest rates, particularly Fed policy in Q1 2026.
GBP/USD – Sterling Holds Above 1.2650 but Lacks Fresh Catalysts
GBP/USD has been trading within a range-bound structure over recent sessions, reflecting limited directional conviction amid year-end pressures.
– The pair continues to respect the 1.2650 support level, with price action staying above the 50-day moving average.
– Resistance lies near 1.2800 and extends to 1.2855, where previous swings topped out earlier this quarter.
– Momentum indicators are neutral to slightly bullish, suggesting a wait-and-see attitude from market participants.
– A break below 1.2650 could expose the downside toward the 1.2520 support zone, while a break above 1.2800 may trigger a rally toward the psychological 1.3000 barrier.
The outlook for Sterling will likely remain influenced by developments in the Bank of England’s interest rate projections and broader risk sentiment moving into the new year.
USD/JPY – Uptrend Intact While Testing 143.00 Zone
The USD/JPY continues to reflect bullish price action, supported by divergence in U.S.-Japan monetary policy expectations.
– The pair has rebounded strongly above the 140.00 threshold and is currently testing the 143.00 resistance area.
– Both 50-day and 200-day moving averages are sloping upward, supporting ongoing bullish momentum.
– RSI has returned to the 60 level, indicating buyers remain in control.
– If the pair clears 143.00, it could run up to 144.50 and potentially 145.70.
– On the downside, key support rests near 141.00 and 140.20.
The Bank of Japan’s cautious stance on tightening continues to favor the USD over the JPY, especially as U.S. Treasury yields consolidate at elevated levels.
AUD/USD – Consolidation Phase Near Resistance
The Australian dollar has been consolidating near the 0.6800 level after recovering from a mid-November trough.
– The 0.6720 area is offering strong support, with bullish attempts capped near 0.6845.
– Both short-term and medium
Explore this further here: USD/JPY trading.