As the new trading week begins, global markets are reeling from both political shocks and a weakened U.S. economic outlook. Amid speculation around Federal Reserve independence, disappointing job numbers, and cautious inflation expectations, the U.S. dollar forecast for January 12–16, 2026, remains bearish.
In this week’s USD forecast, we assess whether the dollar rate will increase or decrease, identify the key macro and technical drivers, and provide actionable outlooks on major FX pairs like EUR/USD, GBP/USD, and USD/JPY.
Weekly FX Market Summary (Jan 12–16, 2026)
- Fed Pause Continues
The Fed held rates at 3.50–3.75% after cutting three times in 2025. Markets now push rate-cut expectations to mid-2026 following sluggish job data. See full Fed Rate Outlook for 2026 - BoE Holds, Pound Supported
The Bank of England kept rates at 3.75%. With inflation falling to 3.2% in November, further cuts seem unlikely in Q1. GBP stays firm ahead of Thursday’s GDP data. - ECB Steady, Euro Resilient
Eurozone inflation is now 2.0%, and economic growth remains fragile. The ECB is likely to pause, keeping EUR/USD supported. - BoJ Shocks with Hike to 0.75%
The Bank of Japan raised rates for the first time in decades. This continues to support the yen and limits USD/JPY near 160.00. Bank of Japan rate hike - Political Shock Hits USD
A U.S. Department of Justice probe into Fed Chair Jerome Powell triggered risk aversion, a surge in gold to $4,600, and broad dollar selling on Monday. Fed Chair Powell investigation
Will the Dollar Rate Increase This Week?
Short Answer: Unlikely.
The U.S. dollar is likely to remain under pressure this week unless a surprise CPI or geopolitical event causes a spike in risk aversion.
Key Drivers of USD This Week:
| Driver | Summary |
|---|---|
| Fed Policy Outlook | No cuts expected until mid-2026. Dovish tone keeps USD soft. |
| Economic Data | Weak payrolls (+50K) and rising unemployment (4.4%) weigh on the greenback. |
| Political Risk | Powell investigation adds uncertainty and market volatility. |
| Risk Sentiment | Gold and CHF rally as safe havens; equities wobble. |
| Technical Positioning | DXY near 99; downside bias remains intact with potential move toward 98.00. |
Dollar Predictions This Week: What to Expect
| Currency Pair | Bias | Forecast Range | Key Drivers |
|---|---|---|---|
| EUR/USD | Mildly Bullish | 1.1600 – 1.1900 | Fed vs ECB divergence, US CPI |
| GBP/USD | Mildly Bullish | 1.3400 – 1.3700 | UK macro vs. U.S. political risk |
| USD/JPY | Bearish USD | ¥154.00 – ¥160.00 | BoJ hikes, safe-haven demand |
| EUR/GBP | Neutral | €1.1500 – €1.1700 | UK vs. EU data surprises |
| DXY Index | Bearish | 98.00 – 100.00 | Technical compression, Fed pause |
USD Technical Outlook: DXY at Risk
The Dollar Index (DXY) rebounded recently but still trades near 99, well below year-end 2025 levels. Unless CPI surprises on the upside, a retest of the 98.00 level is likely.
- Support: 98.00
- Resistance: 100.00–100.50
- Bias: Bearish unless strong data or Fed shifts tone
Currency Pair Deep Dives
EUR/USD – Can the Euro Break Above 1.1750?
The euro trades near 1.1650 after pulling back from recent highs. Technical support holds at 1.1580, with resistance near 1.1750.
- Bullish Breakout Potential: A strong close above 1.1750 could target 1.1900–1.2000
- Catalyst: Soft U.S. CPI or dovish Fed commentary
Eurozone inflation is steady at 2.0%, while U.S. inflation risks are skewed lower — favoring euro strength short term.
GBP/USD – Pound Strength to Continue?
GBP/USD jumped on Monday to 1.3460 after USD weakness. The trend remains bullish from late 2025, with the pound up 5% in that time. View our UK inflation tracker
- Support: 1.3400
- Resistance: 1.3700
- Catalyst: UK GDP surprise or deeper U.S. political fallout
If U.S. dollar pressure remains, GBP/USD could gradually rise toward 1.3700 in coming sessions.
USD/JPY – Yen Reclaims Ground
USD/JPY remains capped near ¥160.00 as the BoJ remains hawkish. Talk of FX intervention also limits dollar upside.
- Support: ¥154.00
- Resistance: ¥160.00
- Catalyst: Any fresh risk-off or global equity decline
EUR/GBP – Range Trading Persists
With UK-EU yield spreads narrowing, EUR/GBP may continue sideways.
- Support: €1.1400
- Resistance: €1.1700
- Catalyst: UK GDP vs. ECB speeches
The cross sits around €1.152, with little directional momentum expected short term.
Key Economic Events (Jan 12–16, 2026)
| Date | Event | Impact |
|---|---|---|
| Jan 12 | Fed Chair Powell probe | 🔥 High – Drove Monday’s selloff |
| Jan 13 | US CPI (Dec) | 🔥 Very High – Inflation trajectory |
| Jan 13 | US Real Earnings | Low |
| Jan 14 | US PPI (Dec) US CPI release | Medium – Inflation signals |
| Jan 15 | UoM Consumer Sentiment | Medium – Fed narrative shaping |
| Jan 15 | UK Weekly Unemployment Claims | Low – Cable sensitivity only on surprises |
Weekly Forex Forecast – FAQs
Will the dollar rate increase this week?
Not likely. The dollar remains weak due to soft economic data and political headlines.
Is the USD expected to rise or fall this week?
Expected to fall or stay flat. A strong CPI print could spark a bounce, but rallies are likely to be sold into.
Will the British pound rise?
Yes, GBP/USD has a mild upside bias, especially if UK GDP beats or U.S. political drama deepens.
Can EUR/USD hit 1.20 this week?
Not this week unless there’s a major surprise — but a break above 1.1750 could make 1.20 viable in the coming sessions.
What is the exchange rate forecast this week?
- EUR/USD: 1.1600 – 1.1900
- GBP/USD: 1.3400 – 1.3700
- USD/JPY: ¥154 – ¥160
- EUR/GBP: €1.1500 – €1.1700
Bottom Line: Will the USD Keep Falling?
The dollar is in a broad downtrend driven by:
- Dovish Fed outlook
- Soft inflation and labor data
- Eroding rate differentials
- Rising political risk
Unless CPI surprises to the upside or Powell’s situation stabilises fast, traders are likely to keep selling USD rallies and buying dips in EUR, GBP, and JPY.
Pro Trading Tip
Watch these key levels:
- EUR/USD breakout zone: 1.1750
- USD/JPY resistance: ¥160.00
- DXY support zone: 98.00
Use these zones for potential reversal setups or momentum trades, depending on data triggers.
