US Dollar Index (DXY) dives to late September lows near 101.25 on US election results
- DXY attracts heavy selling on Wednesday as early US election results pointed to a Democratic victory.
- Safe-haven flows drag US bond yields lower, exerting additional downward pressure on the US Dollar.
- Fed rate hike bets and geopolitical risks could limit further losses ahead of key US macro releases.
The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, comes under intense selling pressure during the Asian session on Wednesday, dropping to its lowest level since late September as early US midterm election results heightened political uncertainty. In fact, the initial trend shows the possibility of Democrats securing control of both the House of Representatives and the Senate. This raises the prospect of gridlock in Washington, which could limit government spending.
Meanwhile, a Democratic sweep could be potentially negative for tech stocks and economic growth, boosting demand for safe-haven assets and triggering a fresh leg down in US bond yields. This turns out to be another factor that contributes to the DXY's intraday slump to the 101.25 area. However, hawkish US Federal Reserve (Fed) expectations, along with persistent geopolitical uncertainties, offer some support to the Greenback and help limit deeper losses, warranting some caution for aggressive bearish traders.
According to the EMC Group's FedWatch Tool, traders are currently pricing in over a 75% chance that the US central bank will raise borrowing costs again in December. The bets were reaffirmed by the Labor Department’s monthly Job Openings and Labor Turnover Survey, or JOLTS report, on Tuesday, which showed that job openings rose more than expected in September to 7.5 million. This solidifies bets for an imminent Fed rate hike against the backdrop of resilient economic growth and persistent price pressures.
Meanwhile, President Donald Trump said on Tuesday that the US has no immediate plans to strike Iran, defying Israeli Prime Minister Benjamin Netanyahu's hint at an attack later this week. However, the geopolitical risk premium remains in play as a senior Iranian official told Reuters that the Strait of Hormuz will reopen only if sanctions are waived, and the US naval blockade ends. Furthermore, Iran's Islamic Revolutionary Guard Corps (IRGC) said that four tankers were destroyed after striking mines south of the Strait of Hormuz.
Investors, however, remain hopeful about a potential diplomatic resolution to end the US-Iran war. Moving ahead, Wednesday's US economic docket features the release of the ADP report on private-sector employment and ISM Services PMI. Apart from this, the incoming geopolitical headlines could provide some impetus to the DXY. The focus, however, remains glued to the closely watched US monthly employment details, popularly known as the Nonfarm Payrolls (NFP) report, due on Friday.
DXY 4-hour chart
Technical Analysis
The DXY maintains a bearish near-term bias following an intraday break below the 200-period Simple Moving Average (SMA) on the 4-hour chart. However, some follow-through weakness below the first support near the 38.2% Fibonacci retracement at 101.26 is needed to back the case for further losses to 100.75 and 100.24,.
Moreover, broader structural support emerge toward 99.51 and 98.59 if selling pressure resumes. On the topside, initial resistance is seen at the 200-period SMA at 101.71, followed higher by the 23.6% retracement at 101.89 and then the recent cycle anchor near 102.92.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
US midterm elections FAQs
The US midterm elections are the federal elections held halfway through a president's four-year term. Voters choose all 435 members of the House of Representatives, about one-third of the Senate, and, in many states, governors and other state and local officials.
Election Day is Tuesday, November 3, 2026. Federal law sets it as the Tuesday after the first Monday in November. Early voting and mail voting are already under way in many states.
They decide which party controls each chamber of Congress for the last two years of President Donald Trump's term. The majority party sets the legislative agenda, chooses committee leaders and, in the Senate, controls confirmations of judges and senior officials.
No. The president is elected every four years; the next presidential election is in November 2028. Midterms are often seen as a referendum on the sitting president's party, which historically tends to lose House seats.
Most analysts expect a modest, short-lived reaction in the US Dollar rather than a lasting trend. A divided Congress is widely seen as the base case and is partly priced in. Treasury yields may react more noticeably to the results. Outcomes that raise expectations of fiscal stimulus tend to lift yields and the US Dollar, while gridlock that limits new spending can pull both lower. Political friction, such as funding or debt-ceiling standoffs, can also briefly lift the Dollar as a safe haven. Over six to twelve months, growth and Federal Reserve policy matter more than the vote.
US stocks have historically been weak before midterms and strong after them. Since 1950, the S&P 500 has been higher 12 months after every midterm election, 19 out of 19, with an average gain of about 15%. Analysts link the pattern to uncertainty fading once results are known. Past performance does not guarantee future returns, and some strategists note that high valuations in 2026 could test the streak.
Markets have often welcomed a divided government because gridlock makes sweeping changes to taxes, spending and regulation less likely. Under a Republican president, the S&P 500 has historically done well in years following midterms that split control of Congress. The risks are funding deadlines, debt-ceiling fights and congressional investigations, which can add short-term volatility.
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