US dollar points higher despite cooler than expected ISM data

The ISM Manufacturing PMI reading for April fell to 55.4 vs. an expected reading of 57.6. Despite the lower print, market participants may take solace in the fact that prices paid came in lower than expected, which may indicate that supply chain issues may be easing. The specific measure of prices paid fell from 87.1 in March to 84.6 last month. Supply chain bottlenecks as a result of Covid have been amplified following Russia’s invasion of Ukraine and China’s battle with recent Covid breakouts.

The US Dollar Index (DXY) remains skewed higher as markets continue to price in a hawkish Federal Reserve. The run in April was nothing short of remarkable, with DXY posting just 3 down sessions in the entire month. The rally has briefly stalled out here below the 103.82 level, which represents the January 2017 swing high. The robust melt higher may simply be taking a breather prior to the FOMC policy meeting on Wednesday. Should the Greenback retrace slightly, price remains supported by the March 2020 high at 102.992. Upside resistance remains limited should the Dollar break above the 104 threshold.

US Dollar Index (DXY) one hour chart

Market participants will now be shifting attention to Wednesday’s momentous FOMC policy meeting, where the consensus expectation is for a 50 basis point hike and the start of balance sheet reduction. Fed policy has shaken risk assets of late, with April being the worst month for the Nasdaq 100 since 2008. The week will be rounded out by nonfarm payrolls data for April, with other global risk events sharing the spotlight as well. This week sees policy meetings from the Bank of England as well as the Reserve Bank of Australia.

Upcoming US economic calendar

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