Weekly Forex Forecast: January 4th to 9th, 2026
Original analysis by Christopher Lewis | Adapted and Rewritten by [Your Name]
As we enter the first full trading week of 2026, Forex markets are expected to show increased activity following the holiday season’s subdued volatility. Traders return to their desks and shift focus back to economic fundamentals, monetary policy trends, and geopolitical developments. Below is a comprehensive forecast for several major currency pairs and the overall sentiment for this trading week.
General Market Outlook
The start of the year typically signals a return of market volume and liquidity. Thin conditions during the holidays can lead to unpredictable price action, but the first full week of January usually brings back institutional flow and renewed market structure. Several key dynamics are likely to impact Forex markets this week:
– Economic data released in early January often sets the tone for the month, with employment figures, PMIs, and central bank meeting minutes carrying increased importance.
– Market participants are watching closely for shifts in monetary policy stances, particularly from the US Federal Reserve, European Central Bank (ECB), and Bank of Japan (BoJ).
– Risk sentiment, impacted by geopolitical tensions or perceptions of global economic performance, can also heavily influence safe-haven assets like the US Dollar or Japanese Yen.
Key Forex Pairs to Watch This Week
EUR/USD Outlook
The EUR/USD pair has recently shown signs of stabilization after the volatility seen in December. Although the pair attempted to rally, resistance near the 1.1050 level capped gains. As we move through the first week of January, two key technical levels are in focus.
– Support zone: 1.0900 to 1.0850
– Resistance zone: 1.1050 to 1.1100
Looking at recent economic data, the eurozone remains challenged by weak growth and below-target inflation. While the ECB has exhibited some hawkishness due to inflationary pressures earlier in 2025, any substantial dovish shift could weigh on the Euro.
The Federal Reserve, on the other hand, is expected to maintain a cautious, data-dependent stance. Any clarity on rate cuts or extended restrictive policy could shift the balance of power in the EUR/USD pair.
Trading considerations:
– Look for reversal patterns or consolidation near major support at 1.0850.
– Be cautious of false breakouts given recent holiday-induced volatility.
– A daily close above 1.1100 could trigger further upside.
GBP/USD Outlook
The British Pound has been mixed versus the US Dollar, with the GBP/USD pair displaying rangebound behavior lately. With the Bank of England walking a tightrope between inflation control and economic slowdown, sterling’s path forward will depend largely on domestic economic data.
Key levels to monitor:
– Support: 1.2600
– Resistance: 1.2800 and 1.2900
UK consumer spending indicators and housing data will help gauge economic resilience. So far, inflation remains above target but has been cooling modestly. Markets are pricing in modest rate cuts in the first half of 2026.
Trading considerations:
– A break and hold above 1.2800 could signal a bullish continuation pattern.
– Conversely, a drop below 1.2600 may invite increased selling pressure.
– Watch for PMI and trade balance data mid-week as potential catalysts.
USD/JPY Outlook
The USD/JPY pair has been on an upward trajectory, bolstered by rising US bond yields and the Bank of Japan’s continued dovish stance. The BoJ recently reaffirmed its ultra-loose monetary policy, further confirming its divergence from global central banks.
Technical zones in play:
– Support: 142.00
– Resistance: 146.00 and 147.50
The pair shows signs of possible overbought conditions, but upward momentum remains intact. The Japanese Yen is vulnerable due to the BoJ’s reluctance to hike interest rates or tighten policy aggressively.
Fundamental themes
Explore this further here: USD/JPY trading.