US Dollar Index Price Forecast: What does the bearish reversal below 101.50 indicate?

• The US Dollar weakens against major currencies amid a political setback for US Republicans.
• Majorities in both the House and the Senate go to the Democrats.
• US private-sector employment figures and ISM Services PMI data are next on investors’ radar.

The US Dollar (USD) trails its major currency counterparts on Wednesday, with the Democrats’ victory in both chambers of the United States (US) federal legislature weighing on the currency.

At the time of writing, a 0.43% decline leaves the US Dollar Index (DXY) near 101.40, not far from the monthly low of 101.25 reached earlier in the day. The index measures the Greenback against six major currencies.

With Democrats taking control of both US chambers, concerns have emerged over whether President Donald Trump’s administration can keep its policies moving without obstruction, particularly support for investment in Artificial Intelligence (AI) infrastructure.

According to analysts at ING, a brief bout of market unease over the US political landscape led to a sharp, short-lived response, driven by “speculation over whether a new Democrat Congress would slow AI capex plans”. They point out that the “chip exporter-heavy stock markets of Korea and Taiwan were briefly down 3-4% overnight on news of the blue wave, but have since recouped all those losses.” Rates and foreign exchange markets have followed a comparable course, with ING noting that “US two-year yields have reclaimed most of their 8-9bp drop and the likes of USD/CHF and USD/JPY have reversed around half of their 1% fall in early Asia.”

Explaining the turnaround in prices, ING says it “probably owes to the fact that the Democrats do not take office until January,” adding that “one wild-card risk removed from the dollar's downside has been President Trump accepting these results.”

The bank nevertheless warns that “overnight price action could provide a preview for markets in 2027,” as markets may then price in the policy consequences of a Democrat Congress more fully. ING strategists reaffirm that they “had felt that a Democrat Congress would be a mild dollar negative – both in terms of what it would mean for the AI story and the prospect of a prolonged US government shutdown potentially from next summer.”

Attention on the economic calendar is firmly on October’s US ADP Employment Change and ISM Services PMI figures, both due later in the day.

US Dollar Index Technical Analysis: Where Are the Key Barriers?

Trend: A mildly bearish short-term outlook persists on the daily chart, where Dollar Index Spot is trading at 101.38. The index remains below its 20-day Exponential Moving Average (EMA) of 101.78 and a succession of descending trend-line resistance levels.

With the Relative Strength Index (14) recently slipping to 45.28, upward momentum appears to be weakening. This supports the view that recoveries are likely to face limits as long as the price remains below the resistance cluster formed by the short-term EMA and falling trend lines from 102.46 and 102.96.

Any advance first faces resistance near 101.40, where a short-term rising trend line has turned into a barrier, followed by the 20-day EMA at 101.78. Heavier supply lies at the descending trend lines around 102.46 and 102.96. A break below 101.25, on the other hand, could set off another decline.

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