**Forex Market Outlook: Key Currency Pairs in Focus (January 16–20, 2026)**
*Adapted and expanded from a technical analysis by Tomasz Wiśniewski, originally published on DailyForex.*
The forex market is entering the third trading week of January 2026 with substantial momentum. Several major currency pairs are reacting to shifting interest rate expectations, central bank policy paths, and broader economic indicators from key global economies such as the United States, the Eurozone, the United Kingdom, Japan, and Australia. Below is a comprehensive technical and fundamental overview of the major forex pairs drawing significant attention from traders this week: EUR/USD, GBP/USD, USD/JPY, AUD/USD, and USD/CAD, along with cross-pairs like EUR/GBP.
This analysis reflects both technical chart patterns and macroeconomic influences expected to shape currency movements throughout the week. The information is derived from expert commentary, price action, and economic calendars. The primary source is a recent technical analysis article by Tomasz Wiśniewski on DailyForex, with additional insights drawn from Bloomberg, ForexLive, and Reuters.
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## EUR/USD: Bearish Reversal in Progress
The EUR/USD pair, typically the most liquid in the forex market, is displaying signs of a bearish reversal after a previously strong uptrend. Last week, price action tested and rejected the 1.10 resistance level, a psychologically significant zone that also coincides with technical resistance on the daily chart.
### Technical Analysis
– Price has formed a double top around the 1.10 mark, suggesting waning bullish momentum.
– The pair has broken below the neckline support at 1.0920, signaling a potential further decline.
– RSI (Relative Strength Index) is falling below the 50 level on the daily timeframe, supporting a bearish short-to-medium term outlook.
– A Fibonacci retracement from the October lows to the December highs places the next key support level around 1.0850, followed by 1.0780.
### Fundamental Drivers
– Mixed economic data from the Eurozone is contributing to a lack of bullish conviction.
– European Central Bank (ECB) officials have recently maintained a cautious tone, resisting expectations for aggressive rate cuts in Q1 2026.
– Contrast this with better-than-expected U.S. retail sales and employment data, which could delay the Federal Reserve’s timeline for rate cuts, boosting demand for the USD.
### Forecast
Unless EUR/USD reclaims 1.0920 decisively, the near-term bias remains bearish. Traders should prepare for tests of the 1.0850 and 1.0780 support zones.
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## GBP/USD: Bullish Breakout Pauses at Resistance
The British pound has been relatively strong against the greenback in early January, but the GBP/USD pair is currently consolidating after a breakout move that took price above 1.2700.
### Technical Analysis
– The price climbed above the neckline of an inverse head and shoulders pattern formed in December, suggesting bullish continuation potential.
– Resistance stands at 1.2790, a previous high from July 2025. A firm break above this could open space toward the 1.2890 area.
– Support is now established at 1.2650, the neckline of the reversed pattern.
– The MACD suggests continued positive momentum, though some signs of divergence are emerging.
### Fundamental Factors
– UK inflation data remains sticky, delaying expectations for Bank of England (BoE) rate cuts.
– BoE Governor Andrew Bailey hinted at a “wait-and-see” approach, giving GBP an edge over currencies with more dovish central banks.
– U.S. macro data remains relatively strong, but the dollar’s momentum has paused as traders reassess Fed policy direction.
### Forecast
The outlook is bullish above 1.2650, with upside targets at 1.2790 and 1.2890. However, a drop below
Read more on USD/CAD trading.