Near 101.25: US Dollar Index (DXY) plunges to late September lows as US election results emerge

DXY faces sharp selling on Wednesday, with early US election results signalling a Democratic win.
Lower US bond yields, driven by demand for safe havens, add to pressure on the US Dollar.
Ahead of major US economic releases, Fed rate hike expectations and geopolitical risks may contain further declines.

The US Dollar Index (DXY) hits its lowest level since late September. Heavy selling grips the index during Wednesday's Asian session as early US midterm election results fuel political uncertainty. The gauge measures the Greenback against a basket of currencies. Initial results suggest Democrats could take control of both the House of Representatives and the Senate, raising the possibility of Washington gridlock that could constrain government spending.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

The DXY's intraday slide towards 101.25 also reflects a renewed fall in US bond yields. A possible Democratic sweep could weigh on technology shares and economic growth, encouraging demand for safe-haven assets. Nevertheless, expectations of a hawkish US Federal Reserve (Fed) and continuing geopolitical uncertainty provide the Greenback with some support. These factors help contain further declines and suggest caution for traders taking aggressive bearish positions.

A December increase in US borrowing costs carries a probability of over 75% in current market pricing, according to the EMC Group's FedWatch Tool. Tuesday's monthly Job Openings and Labor Turnover Survey, or JOLTS report, from the Labor Department reinforced those expectations: September job openings climbed to 7.5 million, exceeding forecasts. With economic growth remaining resilient and price pressures persisting, the data strengthen expectations of an imminent Fed rate hike.

Geopolitical risks remain significant despite President Donald Trump's statement on Tuesday that the US has no immediate plans to strike Iran. His remarks ran counter to Israeli Prime Minister Benjamin Netanyahu's suggestion of an attack later this week. 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, keeping the geopolitical risk premium in place. Iran's Islamic Revolutionary Guard Corps (IRGC) also reported that four tankers had been destroyed after hitting mines south of the Strait of Hormuz.

Hopes for a diplomatic settlement to end the US-Iran war nevertheless persist among investors. Wednesday brings the US ADP private-sector employment report and ISM Services PMI, while fresh geopolitical developments could also give the DXY direction. The main focus remains Friday's closely watched monthly US employment figures, commonly known as the Nonfarm Payrolls (NFP) report.

4-hour DXY chart

Technical Outlook

An intraday move beneath the 200-period Simple Moving Average (SMA) on the 4-hour chart keeps the DXY's near-term outlook bearish. Confirmation of further downside towards 100.75 and 100.24 would require sustained weakness below initial support around 101.26, the 38.2% Fibonacci retracement.

Should selling resume, wider structural support lies towards 99.51 and 98.59. A recovery would first encounter resistance at 101.71, where the 200-period SMA sits. Beyond that are 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.)

US midterm elections: key questions

US midterm elections: what voters decide

Halfway through a president's four-year term, the US holds federal elections known as the midterms. All 435 House of Representatives seats and about one-third of Senate seats are contested. In many states, voters also elect governors and other state and local officials.

2026 midterm elections: voting date

Tuesday, 3 November 2026 is Election Day. Under federal law, voting takes place on the Tuesday following November's first Monday. Many states already have early voting and postal voting under way.

US midterm elections: why control matters

Control of both chambers of Congress for the final two years of President Donald Trump's term is determined by the midterms. Each chamber's majority party directs the legislative agenda and appoints committee leaders. In the Senate, it also controls the confirmation of judges and senior officials.

2026 midterms: no presidential vote

The presidency is not contested in the midterms. Presidential elections take place every four years, with the next scheduled for November 2028. Often regarded as a verdict on the incumbent president's party, midterms have historically tended to cost that party seats in the House.

2026 midterms: potential US dollar impact

A limited, temporary US Dollar response is what most analysts anticipate, rather than a sustained trend. Markets broadly regard a divided Congress as the base case and have partly priced it in. The results could produce a more pronounced response in Treasury yields. Expectations of fiscal stimulus generally support both yields and the US Dollar; by contrast, gridlock that constrains fresh spending can weigh on both. Disputes over funding or the debt ceiling can also briefly support the Dollar through safe-haven demand. Across six to twelve months, economic growth and Federal Reserve policy carry more weight than the election outcome.

Midterm elections: historical stock performance

Historically, weakness in US equities before midterm elections has given way to strength afterwards. The S&P 500 has risen over the 12 months following every midterm since 1950: 19 out of 19, averaging a gain of about 15%. Analysts attribute this pattern to the easing of uncertainty after the results. Past performance does not guarantee future returns, and some strategists caution that high valuations in 2026 could challenge that record.

Divided Congress: market benefits and risks

A divided government has frequently found favour with markets, as legislative gridlock reduces the likelihood of sweeping tax, spending and regulatory changes. With a Republican president in office, the S&P 500 has historically performed well in the years after midterms that divide control of Congress. Funding deadlines, debt-ceiling disputes and congressional investigations remain risks that can increase short-term volatility.