Below 101.50: US Dollar Index Price Forecast Signals Bearish Reversal

• A political setback for US Republicans weighs on the US Dollar against major currencies.
• Majorities in the House and the Senate go to the Democrats.
• US private-sector employment figures and the ISM Services PMI are next in focus for investors.

Both chambers of the United States (US) Congress have been won by the Democrats. The outcome leaves the US Dollar (USD) trailing its major currency counterparts on Wednesday.

The US Dollar Index (DXY) is down 0.43% at the time of writing, trading near 101.40. Measuring the Greenback against six major currencies, the index remains close to the monthly low of 101.25 reached earlier in the session.

With Democrats taking control of both US chambers, concerns have emerged over whether President Donald Trump’s administration can sustain its policies without obstruction. Support for investment in Artificial Intelligence (AI) infrastructure is a particular focus.

A brief bout of market uncertainty followed the US political developments, according to analysts at ING. They attribute the sharp, short-lived response to “speculation over whether a new Democrat Congress would slow AI capex plans”. The analysts 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 have followed a comparable path: “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.”

The recovery in prices, ING says, “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.”

Nevertheless, ING warns that “overnight price action could provide a preview for markets in 2027,” as the policy consequences of a Democrat Congress may then be reflected more fully in prices. Its 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.”

Later in the day, October's US ADP Employment Change and ISM Services PMI releases will command close investor attention on the economic calendar.

US Dollar Index Technical Outlook

Trend: At 101.38 on the daily chart, Dollar Index Spot retains a slightly bearish short-term outlook. It remains below the 20-day Exponential Moving Average (EMA) of 101.78 and successive descending trend-line resistance levels.

Upside momentum appears to be weakening, with the Relative Strength Index (14) recently slipping to 45.28. This supports the view that recoveries are likely to meet resistance while the index stays below the cluster formed by the short-term EMA and descending trend lines from 102.46 and 102.96.

Near 101.40, the former short-term rising trend line provides the first upside barrier. The 20-day EMA at 101.78 follows, before stronger selling interest at the descending trend lines around 102.46 and 102.96. A break below 101.25, meanwhile, could trigger another decline.

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