Weekly FX Technical Analysis - 5th January 2026

FX markets enter the new year in consolidation mode, with major currency pairs testing important technical levels rather than breaking decisively. GBP/USD and EUR/USD have both stalled near key resistance after recent recoveries, EUR/GBP is drifting lower within its broader range, and USD/JPY remains elevated but capped below a well-defined ceiling.

With liquidity normalising after the holidays, the levels now in focus should provide early signals on whether recent trends can reassert themselves or give way to deeper corrective moves as macro themes for 2026 come into sharper view.

GBP/USD

GBP/USD remains in recovery mode but has slipped back toward the 1.3420 region after failing to sustain momentum above the mid-1.35s. Price action continues to respect the broader upward structure from the November lows, however the longer-term descending trendline resistance overhead remains a key constraint. RSI has cooled back toward the mid-50s, signalling that upside momentum has softened and the pair may continue to consolidate unless bulls can reclaim the recent highs.

Potential Scenarios

• Bullish: A sustained break back above 1.3550 would reopen the path toward 1.37 and keep the broader recovery intact.

• Bearish: A break below 1.3380 would increase the risk of a deeper pullback toward 1.3290 and then 1.32.

Macro Backdrop to Consider

Sterling remains sensitive to shifting US dollar dynamics and broader risk sentiment as markets reset for the new year. UK data has stabilised, but expectations around 2026 BoE easing remain an overhang. Near-term direction is likely to track US yield moves and any repricing of Fed expectations as liquidity normalises post-holidays.

GBP/USD: JANUARY ‘25 - PRESENT

EUR/GBP

EUR/GBP has edged lower toward 0.8700 after failing to regain the 0.8750–0.8800 region. The broader trend structure remains constructive, but recent price action suggests the cross is drifting back into consolidation following repeated rejection near the 0.8850 ceiling. RSI has moved down into the mid-30s, highlighting fading momentum and increasing the probability of further near-term softness unless support holds.

Potential Scenarios

• Bullish: A recovery back above 0.8750 would stabilise the cross and refocus attention on 0.8850 resistance.

• Bearish: A break below 0.8700 would expose 0.8650, with deeper support near the mid-0.85s if downside pressure accelerates.

Macro Backdrop to Consider

The cross continues to reflect relative growth and policy expectations between the UK and the Eurozone. With both central banks largely in wait-and-see mode, EUR/GBP is likely to remain technically driven in the near term. Any meaningful shift in inflation surprises or rate expectations could be the catalyst for a break out of the current range.

EUR/GBP: JANUARY ‘25 - PRESENT

EUR/USD

EUR/USD has slipped back toward 1.1680 after failing to hold the push into the 1.18–1.19 resistance zone. The broader trend remains constructive, with the pair still trading above key support levels, but the rejection from the upper boundary of the channel suggests a near-term consolidation phase may develop. RSI has rolled over toward the mid-40s, signalling weakening momentum and increasing the risk of a pullback unless the pair can stabilise quickly.

Potential Scenarios

• Bullish: A renewed break above 1.1750 would re-open the 1.1850–1.1900 resistance band and keep upside momentum in play.

• Bearish: A break below 1.1650 would expose 1.1600 and then 1.1500, with the lower channel support becoming a key medium-term marker.

Macro Backdrop to Consider

The euro remains highly sensitive to the direction of the US dollar and shifting Fed expectations. As markets move into the first full week of January, attention will return to US data and policy commentary that could drive yield repricing. For EUR/USD, the technical picture suggests the pair is at an important inflection point between continuation and consolidation.

EUR/USD: JANUARY ‘25 - PRESENT

USD/JPY

USD/JPY remains elevated but continues to consolidate around 156.80, holding below the key 158 resistance level that has repeatedly capped upside attempts. The broader uptrend structure is still intact, supported by yield differentials, but momentum has moderated and price action suggests a pause rather than a fresh impulse higher. RSI has stabilised in the mid-to-high 50s, consistent with a market that remains supported but not accelerating.

Potential Scenarios

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

• Bearish: A break below 154.40 would signal a deeper correction toward 152.00 and potentially lower if risk sentiment shifts.

Macro Backdrop to Consider

The yen remains under pressure from the policy divergence between the Fed and BoJ, with Japanese rates still anchored. That said, USD/JPY is increasingly sensitive to US yield swings and risk sentiment, while intervention rhetoric remains a background risk if volatility returns. Near-term direction will hinge on whether US yields resume upward pressure or begin to trend lower.

USD/JPY: JANUARY ‘25 - PRESENT

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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.