Weekly FX Technical Analysis - 29th December 2025

FX markets remain range-bound but constructive as the dollar consolidates and major pairs press into key technical levels. GBP/USD is testing heavy resistance after extending its recovery, EUR/GBP is easing from recent highs but remains supported, EUR/USD continues to grind higher toward channel resistance, and USD/JPY consolidates below a critical ceiling. This week’s update focuses on whether recent momentum can be sustained into the final stretch of the year.

GBP/USD

GBP/USD continues to push higher, extending its recovery toward the 1.35 region after successfully holding above the 1.32 support zone. Price is now pressing into a heavy resistance area defined by the longer-term descending trendline from the 2024 highs. Momentum remains constructive, with RSI holding in the mid-60s, suggesting bullish pressure persists, though upside progress is slowing near resistance.

Potential Scenarios

• Bullish: A sustained break above 1.3550 would open the door toward 1.37 and potentially a broader trend reversal.

• Bearish: Failure to clear resistance could see a pullback toward 1.3380 and then 1.32.

Macro Backdrop to Consider

Sterling remains supported by a softer US dollar and improving risk sentiment into year-end. UK data has stabilised, reducing downside pressure on GBP, though expectations for BoE easing in 2026 cap upside potential. Near-term direction will remain sensitive to US yields and global risk appetite in thin holiday liquidity.

GBP/USD: JANUARY ‘25 - PRESENT

EUR/GBP

EUR/GBP has slipped back toward 0.8730 after failing once again to sustain a move above the 0.8850 resistance zone. The pair remains within its broader rising channel, but momentum has softened further, with RSI dipping into the low-40s. Near-term price action suggests consolidation rather than trend continuation.

Potential Scenarios

• Bullish: A renewed break above 0.8850 would reinstate upside momentum toward 0.89.

• Bearish: A break below 0.8710 would increase the risk of a deeper pullback toward 0.8650 and channel support.

Macro Backdrop to Consider

The cross reflects a modest improvement in sterling relative to the euro, as UK data stabilises while Eurozone growth remains subdued. With neither the ECB nor BoE signalling imminent policy changes, EUR/GBP is likely to remain range-bound unless incoming inflation data forces a repricing.

EUR/GBP: JANUARY ‘25 - PRESENT

EUR/USD

EUR/USD continues to grind higher, trading around 1.1780 and edging closer to the upper boundary of its broader descending channel. The structure of higher lows remains intact, and RSI has climbed into the mid-60s, indicating strengthening momentum. However, the 1.18–1.19 zone remains a significant technical ceiling.

Potential Scenarios

• Bullish: A decisive break above 1.1850 would target 1.20 and signal a more meaningful trend shift.

• Bearish: Failure to sustain gains above 1.17 could prompt a pullback toward 1.16 and then 1.15.

Macro Backdrop to Consider

The euro continues to benefit from a softer dollar backdrop as markets look ahead to eventual Fed easing in 2026. Eurozone inflation remains contained, limiting ECB urgency. Near-term direction will depend on US data surprises and shifts in rate expectations during year-end trading conditions.

EUR/USD: JANUARY ‘25 - PRESENT

USD/JPY

USD/JPY remains elevated but continues to consolidate below the key 158 resistance zone. Price is holding around 156.20, supported by the rising channel structure, though momentum has cooled, with RSI drifting back toward the low-50s. This suggests consolidation rather than a trend reversal at this stage.

Potential Scenarios

• Bullish: A break above 158.00 would open the path toward 160.

• Bearish: A break below 154.40 would signal a deeper correction toward 152.00.

Macro Backdrop to Consider

Yield differentials remain firmly in favour of the dollar, keeping the broader USD/JPY uptrend intact. While Japanese authorities continue to monitor FX moves closely, low volatility reduces immediate intervention risk. USD/JPY is likely to remain supported on dips unless US yields fall sharply.

USD/JPY: JANUARY ‘25 - PRESENT

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As always, if you’d like to discuss these moves in more detail, or how they could impact your business or personal requirements, please don’t hesitate to get in touch.

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Disclaimer: The information in this publication is provided for general information purposes only. It does not constitute financial or investment advice, nor should it be relied upon as such. Readers should consider their own circumstances and seek independent advice where appropriate.