Academy manager Dolan was appointed in the immediate aftermath of the sacking of Brian McDermott last week, with the Royals 19th in the table.
A 1-0 defeat at league leaders Manchester United followed at the weekend but McCarthy, who returned to the bench at Old Trafford after a four-month injury lay-off, reckons Dolan can lead the Berkshire club to safety.
"He's got a great method to the way he works and he gets the boys going," he told the Reading Post.
"I think he's come in and he'll do a good job for us. We'll have to see how the games turn out, but I think he's got a great chance and all the lads are with him."
Gus Poyet is the latest name on Reading's managerial radar, with tentative talks understood to have already taken place with the Brighton boss.
Paolo Di Canio and Nigel Adkins have also been linked with the vacancy, although the latter has no interest as he plots his next move following his departure from Southampton.
Yet McCarthy believes a good show in his short-term capacity could see 45-year-old Dolan appointed on a permanent basis.
"We've got a great team spirit and with the work he's done with us, we think we've got a good chance of staying up," he said.
"Eamonn's caretaker manager at the moment and depending on results, we'll see how it goes from there."
Poyet has previously been open about his desire to coach in the top flight, although he may elect to resist any approach from Reading with his current side in the Championship play-off shake-up.
Reading owner Anton Zingarevich is believed to be in the country to finalise a new appointment, having shown McDermott the door following a recent home defeat to Aston Villa that left the club mired in the relegation zone.