February 2026 Forex Outlook: Dollar Selling Likely to Persist

As January 2026 draws to a close, FX markets find themselves at a pivotal juncture, shaped by diverging central bank policies and evolving technical signals. After delivering a cumulative 175 basis points of rate cuts since September 2024, the Federal Reserve now faces a critical inflection point. Meanwhile, the European Central Bank has wrapped up its easing cycle, and the Bank of Japan appears poised to begin its first substantive tightening phase in decades.

Together, these dynamics have fueled sustained U.S. dollar weakness—a trend that looks set to continue as U.S. economic growth moderates and investor confidence deteriorates.

From a technical standpoint, the dollar is underperforming against its major counterparts and is trading near multi-month lows. In this outlook, we examine the greenback’s performance versus USD/JPY, EUR/USD, and GBP/USD, incorporating both fundamental drivers and technical considerations.

USD/JPY – Weekly Timeframe

USD/JPY is currently trading in the mid-150s after failing to sustain gains near the 160 region, where price action appears to have formed a double-top structure. While the pair continues to find support along a rising trend line in place since January 2021, bearish RSI divergence has intensified, signaling potential downside risk for the U.S. dollar in the months ahead.

Key resistance remains near 160, while a support base is evident in the 148–150 zone. A decisive weekly close below this area would strengthen the bearish outlook, potentially opening the door toward the 138 level and aligning with the broader theme of ongoing dollar selling.

EUR/USD – Weekly Timeframe

EUR/USD is currently trading near a key resistance zone around 1.19. This area carries both psychological significance and technical importance, representing a measured move based on Fibonacci projections. With no evident bearish divergence at present, the possibility of a sustained break above 1.20 cannot be dismissed. Such a move would likely open the path toward the 1.30 level over the coming months, in line with the broader outlook of continued U.S. dollar weakness.

GBP/USD – Daily Timeframe

Sterling’s advance against the U.S. dollar appears to be driven more by dollar weakness than by underlying pound strength. JP Morgan strategist Nelligan cautions that any meaningful outperformance in sterling is more likely to materialize in the first half of the year, with fiscal concerns potentially resurfacing in the second half.

GBP/USD projections align with the broader bearish-dollar theme outlined in this report, with the Sigmacast ensemble from Sigmanomics’ classical models pointing to higher levels over the medium term. From a technical perspective, the pair has recently pulled back after closing above a key descending trend line that had capped upside since early 2025.

Sources: Fxstreet