Year-end setup: why the next few sessions can be “quiet, then sudden”

Late December trading is typically liquidity-thinned, which often compresses ranges—until a headline or a positioning squeeze triggers a sharp move. Several sell-side notes have highlighted subdued holiday flow and the risk that positioning becomes “fragile” when depth is low. 

For both EUR/USD and GBP/USD, the dominant macro axis remains:

1. what markets think the Fed will do in 2026, versus
2. how quickly the ECB and BoE ease (or resist easing) as inflation and growth evolve.

EUR/USD outlook (coming days): bullish bias, but sensitive near key resistance

What’s driving it now

• USD softness theme into year-end has been a recurring narrative in 2025 market wrap coverage, with the dollar described as notably weaker across the year in some major retrospectives. Financial Times
• Holiday conditions can mask real intent; moves can look “clean” technically, then reverse quickly once liquidity normalizes. 

Technical map (practical levels traders are watching)

Recent broker analysis has framed 1.18 as an important zone, with resistance “thin” above 1.18 toward ~1.1920, and 1.20 as a major psychological next marker if upside momentum persists. Forex+1

Base case (next several sessions)

Slightly constructive EUR/USD, with price action likely to oscillate around major round numbers and recent highs. In thin markets, expect:

• grinding upside continuation attempts, but
• frequent pullbacks to “retest” prior breakout areas.

Two near-term scenarios

Scenario A: Upside continuation

• Conditions: benign risk sentiment + stable/softer U.S. yields + no hawkish Fed repricing.
• Implication: repeated pressure on the 1.18+ region; a clean break and hold above could open the path toward the ~1.19 area discussed by market commentary. 

Scenario B: Range and snapback

• Conditions: sudden USD bid (headline risk; yield pop; risk-off wobble) in thin liquidity.
• Implication: false breaks above resistance and a quick return into the prior range (a common year-end dynamic).

Early-January “watch list” catalysts

For the first full trading week of January, calendar risk typically rises. Official and institutional calendars show early-January U.S. activity indicators (e.g., Initial Claims, ISM Manufacturing, ADP) and Euro area inflation-related releases around that window