US Dollar Index Price Forecast: Reverses lower below 101.50

• A political setback for US Republicans leaves the US Dollar weaker against its major counterparts.
• Majorities in both 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.

Democratic victories in both chambers of the United States (US) Congress weigh on the US Dollar (USD) on Wednesday, leaving it trailing its major currency counterparts.

At the time of writing, a 0.43% decline leaves the US Dollar Index (DXY) near 101.40. The index, which measures the Greenback against six major currencies, remains close to the monthly low of 101.25 reached earlier in the day.

With Democrats taking control of both chambers of Congress, doubts have emerged over whether policies introduced by President Donald Trump’s administration can continue unimpeded, particularly support for investment in Artificial Intelligence (AI) infrastructure.

According to ING analysts, US political developments briefly rattled markets: “speculation over whether a new Democrat Congress would slow AI capex plans” prompted a steep, short-lived response. As they point out, 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.” Interest-rate and currency markets have followed a comparable course, with “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.”

In ING’s view, the retracement “probably owes to the fact that the Democrats do not take office until January,” and the bank adds that “one wild-card risk removed from the dollar's downside has been President Trump accepting these results.”

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

October’s US ADP Employment Change report and ISM Services PMI, both due later in the day, are the key economic releases investors are awaiting.

US Dollar Index Remains Under Technical Pressure

Trend: Below both the 20-day Exponential Moving Average (EMA) at 101.78 and successive descending trend-line barriers, Dollar Index Spot trades at 101.38 on the daily chart. This leaves the near-term outlook mildly bearish.

Upside momentum appears to be waning, with the Relative Strength Index (14) recently slipping to 45.28. That reading supports the view that recoveries are likely to face a ceiling while the price remains below the resistance cluster formed by the short-term EMA and descending trend lines from 102.46 and 102.96.

A break below 101.25 could open the way to renewed losses. To the upside, the former short-term rising trend line now offers initial resistance near 101.40, followed by the 20-day EMA at 101.78. More substantial selling pressure is evident at the descending trend lines around 102.46 and 102.96.

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