Will the dollar rate increase next week? The short answer: probably not.
This week’s USD forecast (Jan 5–9, 2026) suggests continued dollar weakness amid Fed rate cuts, soft U.S. data, and strength in rival currencies like the euro and pound. Read on for our full currency predictions, key support/resistance levels, and data events that could swing the market.
Weekly Market Summary (Jan 5–9, 2026)
- Fed Easing Cycle Continues: The Fed cut rates by 0.25% in December (its third cut of 2025), now targeting 3.50%–3.75%.
- BoE Follows Suit: Bank of England also cut rates to 3.75% amid mixed UK growth data.
- Dollar Slips Further: Weak NFP and inflation below 3% reinforce bearish USD bias.
- Euro & Pound Rally: EUR/USD near 1.18, GBP/USD above 1.35 as ECB holds and UK yield edge persists.
- BoJ Hikes: Surprise BoJ rate increase to 0.75% puts pressure on USD/JPY, with yen intervention threats capping upside.
Dollar Predictions This Week – What’s Driving USD?
The U.S. dollar enters the first full week of 2026 on the defensive. Key factors include:
- Fed–ECB Policy Divergence: The Fed is actively cutting rates; the ECB remains on hold at 2.00%.
- Weak U.S. Data: November Nonfarm Payrolls rose just 64k, unemployment hit 4.6%, and inflation cooled to ~2.7%.
- Rate Expectations: Markets price in another 50 bps of Fed easing in 2026.
- Diminished Yield Advantage: USD’s carry trade appeal has faded; DXY ended 2025 down 10% YoY.
Bottom line: Unless Friday’s NFP or ISM Services data brings a surprise, the USD is likely to drift lower. It may even consolidate near recent lows.
Weekly Forex Forecast Table (Jan 5–9, 2026)
| Pair | Bias | Forecast Range | Key Drivers |
|---|---|---|---|
| EUR/USD | Bullish | 1.1800 – 1.2050 | Fed cuts, ECB steady, technical breakout potential |
| GBP/USD | Mildly Bullish | 1.3300 – 1.3600 | BoE cautious easing, soft USD, UK inflation support |
| USD/JPY | Bearish USD | ¥154.00 – ¥159.50 | BoJ hike, intervention risk, range-bound behavior |
| GBP/EUR | Neutral | €1.1300 – €1.1600 | BoE vs. ECB pause, yield spread, growth parity |
| DXY Index | Bearish | 98.00 – 100.00 | Fed dovish, yield erosion, risk appetite up |
Currency Pair Outlooks
EUR/USD – Approaching Breakout Above 1.20
- Current Trend: Uptrend intact; up ~13% YoY from $1.04.
- Watch: A daily close above 1.1875 could clear the path to 1.20+.
- Support: 1.1750 (last breakout level).
- Data to Watch: Eurozone Flash CPI (Jan 7). Upside surprise could lift EUR.
GBP/USD – Pound Holds Firm
- Support: 1.3300
- Resistance: 1.3520 – 1.3600
- Outlook: GBP gains on soft USD and sticky UK inflation (~3.2% YoY). BoE cautious, but not aggressive. Pound supported, but needs a catalyst (like strong UK or weak US data) to break higher.
USD/JPY – Range-Bound but Tilted Bearish
- Support: ¥154.00
- Resistance: ¥159.50 – ¥160.00
- Outlook: BoJ surprise hike (0.75%) adds downside risk. Japan may intervene if yen weakens past ¥160. Carry trades support dips, but upside capped.
Key Events This Week
| Date | Event | Expected Impact |
|---|---|---|
| Jan 7 | Eurozone Flash CPI (Dec) | Medium – Watch for signs of inflation re-acceleration |
| Jan 7 | US ISM Services PMI (Dec) | Medium – Slight slowdown expected |
| Jan 9 | US Nonfarm Payrolls (Dec) | High – Forecast: ~55k jobs, ~4.5% unemployment |
| Jan 9 | Canada Employment Report | Medium – A surprise here could shift USD/CAD |
Volatility Alert: Friday’s NFP is the key risk event. Weak numbers = more USD downside. Strong surprise = temporary USD bounce.
FAQs – Weekly Dollar & Forex Outlook
Will the dollar rate increase next week?
No, unless a major surprise occurs. The trend remains bearish as Fed cuts and weak U.S. data weigh on the dollar.
Is USD expected to rise or fall this week?
The USD is expected to fall or remain weak. Hawkish surprises or a geopolitical risk-off shock are the only likely triggers for USD strength.
Will the British pound rise next week?
The pound has a mildly bullish bias vs USD but may stay range-bound vs EUR. GBP is supported by inflation and relatively higher rates.
Can EUR/USD hit 1.20 soon?
Yes. A sustained close above 1.1875 could lead to a technical breakout toward or even above 1.20.
Bottom Line: Will the USD Keep Falling?
The dollar is in a broad downtrend, and the path of least resistance remains lower as 2026 begins. Fed easing, weaker data, and fading safe-haven demand are all bearish for USD. The DXY is testing the 98.00 area, and a break lower could accelerate downside.
Unless Friday’s NFP or ISM Services data are shockingly strong, traders are likely to continue selling USD on rallies.
Trading Tip: Sell USD strength near resistance levels. Focus on EUR/USD above 1.18 and GBP/USD near 1.35–1.36.
Final Thoughts
With the Fed leading the global easing cycle and U.S. macro data softening, the U.S. dollar looks set to remain under pressure this week. Watch the 1.20 level in EUR/USD and the 160.00 line in USD/JPY — these are the battlegrounds where bulls and bears collide.
Summary: Unless there’s a shock, this week is shaping up to be another dollar-weak week. Take advantage of market swings around data releases, and stay tuned for our next update.
Read our weekly forecast to stay updated with real-time FX outlooks.