United States Dollar Index drops to near 101.00, hitting monthly lows after Democratic sweep

• Falling oil prices and a Democratic sweep in the midterm elections weigh on the US Dollar.
• Robust ADP hiring figures and continued ISM services expansion underpin expectations of a Fed rate rise.
• An 82% probability of a December rate rise is priced in as markets await key jobless claims and payrolls figures.

At a monthly low of 101.20 during Thursday’s Asian session, the US Dollar Index (DXY) is heading lower for a second successive day. The index tracks the US Dollar (USD) against six major currencies.

A Democratic sweep in the US midterm elections prompted heavy selling of the dollar. By giving Democrats control of both houses of Congress, the result fuelled concerns about possible political gridlock in Washington. Expectations that the Middle East conflict would end swiftly also sent oil prices sharply lower, adding to the downward pressure on the US currency.

October’s ADP report showed an increase of 86,000 in private-sector employment, exceeding the 69,000 forecast, although September’s reading was revised down from 90,000 to 86,000. Resilient US economic figures have strengthened expectations of a Federal Reserve rate rise, which may lend the dollar support. The ISM Services PMI, meanwhile, edged down from 54.9 to 54.5. Although slightly short of the 54.8 forecast, it continued to signal solid expansion.

Nearly an 82% probability of a further rate rise in December is now reflected in market pricing, according to the CME FedWatch Tool. Attention turns next to Thursday’s weekly US Initial Jobless Claims figures, followed by Friday’s Nonfarm Payrolls (NFP) report.

Technical Analysis: Dollar Index Remains Under Pressure

Trading at 101.20 on the daily chart, Dollar Index Spot remains below its nine-period and 50-period Exponential Moving Averages (EMAs). Recent recoveries have been unable to regain these dynamic resistance levels, leaving the near-term outlook bearish. At roughly 43, the 14-day Relative Strength Index (RSI) has dropped below the neutral 50 threshold, suggesting that bullish momentum is weakening rather than that the index is outright oversold.

The 50-period EMA, around 101.27, reinforces the first resistance level, while the nine-period EMA near 101.72 is expected to bring further selling interest. A daily close above the latter would be required to relieve the immediate downward pressure. Without such a move, the technical picture suggests that advances towards these averages are likely to meet selling, keeping the Dollar Index exposed to further declines while momentum remains muted.

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