Weekly Forex Forecast: January 4th – January 9th, 2026
Original article by: Mahmoud Abdallah, DailyForex
As the foreign exchange market transitions into the first full trading week of 2026, several major currency pairs are reacting to evolving fundamental and technical factors. The final trading sessions of December showed heightened volatility, largely due to thin holiday volumes, end-of-year portfolio adjustments, geopolitical developments, and anticipation of central bank policy moves.
This upcoming week will test whether current trends will solidify or reverse as market participants reengage with clearer strategies and updated economic data to analyze. Below is a detailed breakdown of key currency pairs and what traders should watch between Monday, January 4th, and Friday, January 9th.
EUR/USD Analysis
The EUR/USD pair closed December 2025 with gains, reflecting broad US dollar weakness and diminishing expectations around further aggressive tightening from the Federal Reserve.
– The pair briefly tested resistance near the 1.1100 level late last week after showing a strong bullish push in December.
– The rally came amid subdued US inflation readings and increasing speculation that the Fed could pivot to rate cuts by mid-2026.
– However, the recent bullish impulse faces resistance in the 1.1120–1.1150 zone.
Key levels to watch:
– Resistance: 1.1150, followed by 1.1185
– Support: 1.1020, then 1.0950
Technical outlook:
– The EUR/USD remains in an upward channel on the daily chart and is comfortably above both the 50-day and 200-day moving averages.
– Momentum indicators such as RSI show the pair is slightly overbought, indicating a possible near-term consolidation or pullback.
– A confirmed break above 1.1150 would open the way for extended gains toward 1.1250.
Fundamental drivers:
– Eurozone inflation data due this week could impact ECB expectations. A softer inflation print may keep any ECB rate hikes off the table.
– US ISM Services PMI, FOMC meeting minutes, and the December Non-Farm Payrolls report will heavily influence the US dollar’s movement.
GBP/USD Forecast
The British pound recorded a strong recovery in December, closing the year near its highest level in six months.
– GBP/USD rallied toward the 1.2800 mark amid broad dollar softness and fading concerns about the UK economy.
– Positive revisions to UK GDP data and better-than-expected retail figures have supported the pound.
– The Bank of England has hinted at holding rates steady for longer despite economic headwinds, which has helped sterling.
Support and resistance points:
– Resistance: 1.2800, followed by 1.2850
– Support: 1.2700, then 1.2620
Technical landscape:
– The pair is following a bullish trajectory, trading above its 50-day and 200-day moving averages.
– RSI on the daily chart remains in bullish territory but below the overbought threshold.
Watch for:
– Any signals from BoE members regarding the potential timing of policy easing could shift market sentiment quickly.
– In the US, upcoming labor market data will be the key variable influencing the GBP/USD in the short term.
USD/JPY Outlook
The Japanese yen strengthened into the year-end as US Treasury yields declined and expectations for future Fed tightening weakened.
– USD/JPY dropped from above 147.00 to below 143.00 during December.
– The yen’s strength was also driven by speculation that the Bank of Japan may shift monetary policy in 2026 after maintaining ultra-loose conditions for decades.
Important thresholds:
– Resistance: 144.00, then 145.75
– Support: 142.50, followed by 141.20
Technical indicators:
– The pair has broken below its 200-day moving average, suggesting growing bearish pressure.
– Sustained closes below 143.00
Explore this further here: USD/JPY trading.