DXY: December Hike Odds Just Fell to 77% — Is 101.20 Still a Buy?

📉 The Setup

The dollar did not fall this week because the Fed turned soft. It fell because the market stopped pricing a political accident.

Democrats took control of Congress, and the reaction was immediate: the Dow gained 1,500 points in its best session since April 2025, and DXY slid 0.39% to 101.32. That is a risk-premium unwind, not a policy shift.

🏛️ Why Now

Two forces are pulling on the dollar at once, and they are not equally important.

The first is election risk. Investors had been holding dollars against a disputed-result scenario. That premium is now gone, and it is not coming back.

The second is rate expectations — and this is where the picture gets uncomfortable. Right after the Fed held at 3.75%–4.00% on 28 October, CME FedWatch priced the odds of a December hike near 83%–85%. Today that number sits closer to 77%–79%.

Read that again. Hike odds fell roughly 8 points in a week — in the same week ADP printed 86,000 private jobs against a consensus near 70,000, and ISM services held at 54.5, comfortably in expansion.

Stronger data, softer hike pricing. That divergence is the story nobody is trading yet.

📊 The Chart: 101.20 Is the Line

On the daily, DXY is sitting near 101.30, inside the 101.20–101.42 zone that capped price on the way up and now has to work as support. It is a clean flip zone, and it is being tested for the first time.

Momentum is weak. Price is below the short-term yellow moving-average cluster. But the longer-term cyan averages are still rising, and the sequence of higher lows from the August base is intact. A corrective pullback and a trend reversal look very different on this chart, and right now this still looks like the former.

The levels I'm working with:

• Support: 101.20–101.42, then 101.01 at the lower rising average

• Recovery resistance: 101.62–101.88

• Upside objectives: 102.48, then 102.95

⚠️ The Risk View

I am not buying this blindly, because the bear case here is specific.

A sustained daily close below 101.00 breaks the structure and tells me the market is repricing the end of the tightening cycle, not just the end of election risk. In that scenario, 101.20 was not support — it was a pause.

There is also a subtler trap: if Friday's payrolls beat the 65,000 consensus and hike odds stay stuck at 77%, that divergence becomes confirmation rather than noise. Strong data that fails to lift rate expectations is a dollar-negative signal, full stop.

🎯 How I'm Trading It

My bias stays constructive, but it is conditional.

I want a rejection wick into 101.20–101.42 followed by a daily close back above 101.42. That is my trigger, not my prediction. A recovery through 101.62–101.88 opens 102.48 and puts 102.95 in play.

If instead we close below 101.00, I stand down. No averaging, no hoping.

Friday's nonfarm payrolls at 13:30 UTC is the decider — 65,000 expected against September's 29,000. But watch the reaction in rate pricing, not just the headline number. That is where this trade actually lives.

This is not an election trade. It is a rate-expectation trade wearing an election costume.

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