US election results send US Dollar Index (DXY) tumbling to late September lows near 101.25

• Early US election results suggesting a Democratic win prompt heavy selling in DXY on Wednesday.
• US bond yields fall as investors seek safety, adding to the downward pressure on the US Dollar.
• Ahead of major US economic releases, expectations of a Fed rate rise and geopolitical risks could contain further declines.

Early US midterm election results have increased political uncertainty, sending the US Dollar Index (DXY) to its lowest point since late September amid heavy selling in Wednesday’s Asian session. The index measures the Greenback against a basket of currencies. Initial results suggest that the Democrats could gain control of both the House of Representatives and the Senate, raising the possibility of a legislative impasse in Washington that could constrain government spending.

A Democratic sweep could also weigh on technology shares and economic growth. Demand for safe-haven assets has consequently strengthened, driving a further decline in US bond yields and contributing to DXY’s intraday slide towards 101.25. Nevertheless, expectations of a hawkish US Federal Reserve (Fed), together with continuing geopolitical uncertainty, provide the Greenback with some support and help contain further losses. This suggests that traders taking aggressive bearish positions should exercise some caution.

September job openings climbed by more than expected to 7.5 million, according to the Labor Department’s monthly Job Openings and Labor Turnover Survey, or JOLTS report, released on Tuesday. The figures reinforced expectations of another increase in borrowing costs: the EMC Group’s FedWatch Tool currently shows traders assigning a probability of over 75% to a US central bank rate rise in December. With economic growth proving resilient and price pressures persisting, the data strengthen expectations of an imminent Fed rate increase.

Despite Israeli Prime Minister Benjamin Netanyahu’s suggestion of an attack later this week, President Donald Trump said on Tuesday that the US had no immediate plans to strike Iran. A geopolitical risk premium nevertheless persists. A senior Iranian official told Reuters that reopening the Strait of Hormuz would require sanctions to be waived and the US naval blockade to end. Iran’s Islamic Revolutionary Guard Corps (IRGC) also said that four tankers had been destroyed after hitting mines south of the Strait of Hormuz.

Hopes of a diplomatic solution to end the US-Iran war nonetheless remain among investors. Wednesday’s US data calendar includes the ADP private-sector employment report and the ISM Services PMI, while further geopolitical headlines could also give DXY some direction. The principal focus, however, is Friday’s closely followed US monthly employment release, commonly known as the Nonfarm Payrolls (NFP) report.

DXY on the 4-hour chart

DXY Retains a Bearish Near-Term Bias

An intraday move beneath the 200-period Simple Moving Average (SMA) on the 4-hour chart leaves DXY’s near-term outlook bearish. Further weakness below initial support around the 38.2% Fibonacci retracement at 101.26 would, however, be needed to strengthen the case for a decline towards 100.75 and 100.24.

Should selling pressure return, wider structural support lies towards 99.51 and 98.59. Any recovery would initially face resistance at the 200-period SMA at 101.71, ahead of the 23.6% retracement at 101.89 and the recent cycle anchor around 102.92.

(The technical analysis of this story was written with the help of an AI tool. Learn more.)