Quick Answer: Will the dollar rise this week?
Unlikely.
The U.S. dollar starts the week under pressure as the Federal Reserve stays dovish, U.S. data momentum remains soft, and rival currencies like the euro and pound continue to attract flows.
This USD forecast for Jan 19–23, 2026 suggests the dollar is more likely to drift lower than stage a sustained rebound. Any short-term USD strength is expected to fade rather than reverse the broader trend.
Weekly USD Outlook: What’s Driving the Dollar This Week?
The dollar’s weakness isn’t about one headline — it’s the combined effect of policy, yields, and relative growth.
1. Federal Reserve: Easing Bias Remains
After cutting rates three times in late 2025, the Fed is widely expected to hold rates steady at 3.50%–3.75% at its January meeting (Jan 27–28).
Markets view this pause as temporary, not a shift in direction.
- Inflation is running near 2.7%
- Job creation has slowed sharply
- Growth indicators remain uneven
This keeps pressure on the USD, as investors position for more easing later in 2026.
2. Weak U.S. Data Continues to Weigh
Recent U.S. data has failed to impress:
- December nonfarm payrolls: +50k
- Unemployment: 4.4%
- 2025 job creation: ~584k total, far below 2024 levels
With labour markets cooling and inflation under control, the Fed has little incentive to turn more hawkish — limiting upside for the dollar.
3. Rate Differentials Are No Longer Favourable
The dollar’s yield advantage has narrowed:
- Fed easing contrasts with an ECB still holding rates near 2.00%
- UK rates remain higher at 3.75%
- Carry flows are no longer USD-friendly
This explains why the Dollar Index (DXY) fell roughly 9% in 2025 and continues to struggle early in 2026.
Bottom line: Unless risk sentiment suddenly turns defensive, the path of least resistance for USD remains lower.
Weekly Forex Forecast Table (Jan 19–23, 2026)
| Pair | Bias | Forecast Range | Key Drivers |
|---|---|---|---|
| EUR/USD | Bullish | 1.1600 – 1.1900 | Fed easing vs ECB hold |
| GBP/USD | Mildly bullish | 1.3300 – 1.3500 | Sticky UK inflation, soft USD |
| USD/AED | Neutral | 3.66 – 3.68 | Pegged currency |
| GBP/EUR | Neutral | 1.1400 – 1.1600 | Balanced policy outlook |
| DXY | Bearish | 98.0 – 100.0 | Narrowing yield gap |
EUR/USD Forecast: Uptrend Intact, 1.18 in Focus
Trend: Bullish
Resistance: 1.1800 → 1.2000
Support: 1.1600 → 1.1470
EUR/USD remains supported by:
- Fed easing expectations
- Eurozone inflation near 1.9%
- Reduced pressure on the ECB to change course
A daily close above 1.18 would likely trigger a push toward 1.20. Failure to break may lead to short-term consolidation rather than reversal.
Key data: Eurozone flash PMIs (Jan 23)
GBP/USD Forecast: Pound Holds Firm Against Dollar
Trend: Mildly bullish
Support: 1.3300
Resistance: 1.3480–1.3500
Sterling remains resilient due to:
- UK rates staying higher than U.S. rates
- Inflation still near 3%
- BoE signalling caution on further cuts
GBP/USD may remain range-bound without a catalyst, but dips continue to attract buyers.
Key data:
USD/AED Forecast: Stable by Design
USD/AED remains anchored near 3.6725 under the UAE’s dollar peg.
- Local rates mirror Fed moves
- FX volatility remains minimal
- Oil prices influence liquidity, not the peg
Expect continued stability unless there is a major policy shift — which is not expected.
GBP/EUR Forecast: Sideways, No Clear Winner
GBP/EUR remains locked in a narrow range:
- UK rates higher than Eurozone
- Eurozone inflation lower than UK
- Neither side has a clear advantage
Until a data surprise breaks the balance, expect choppy but contained movement.
Dollar Index (DXY) Forecast: Bearish Bias Holds
Range: 98.0 – 100.0
DXY continues to consolidate after last year’s sharp decline. The broader structure remains negative.
- Below 98.0 → downside momentum accelerates
- Near 100.0 → rallies likely fade
Without a hawkish Fed shift or risk-off shock, sustained upside looks limited.
Key FX Events This Week
| Date | Event | Why It Matters |
|---|---|---|
| Jan 21 | UK CPI | Could influence BoE expectations |
| Jan 22 | ECB minutes | Insight into ECB stance |
| Jan 23 | Flash PMIs (US, EU, UK) | First growth signal of 2026 |
| Jan 23 | UK Retail Sales | Consumer demand check |
FAQs: Dollar Outlook This Week
Will the dollar rise this week?
Unlikely. The Fed’s stance and weak U.S. data limit upside. Short-term bounces may occur but lack staying power.
Is USD expected to fall further?
The bias remains lower. Rate expectations and narrowing yield spreads continue to weigh on the dollar.
Can EUR/USD reach 1.20?
Yes — but only after a confirmed break above 1.18. Without a catalyst, progress may be gradual.
Bottom Line: Sell USD Rallies, Not Dips
The broader USD trend remains soft as 2026 unfolds. Fed policy, slowing U.S. growth, and improving conditions elsewhere continue to favour non-USD currencies.
Strategy insight:
Dollar strength near resistance (DXY ~100, EUR/USD ~1.18, GBP/USD ~1.35) may offer better opportunities than chasing weakness.
We’ll continue monitoring the data and update you with the next weekly forecast.
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