The ISM manufacturing PMI came in at 58.7, a decrease from 61.1 in the previous month. On the positive side, the employment index arrived at 54.2 versus 53.5 expected. At the close of trade, the S&P500 was down less than 0.1%, the Dow Jones gained 0.59%, and the Nasdaq declined 1.33%.

USD index clings to 96.00

Meanwhile, the USD index peaked just below the 96.50 area before retreating to the 96.25 zone. Today, the index turned slightly negative but still holds above the 96.00 figure ahead of the ADP employment report and the FOMC meeting minutes due later in the day. EURUSD bounced marginally on Wednesday, treading water around the 1.1300 figure during the European hours.

Should the jobs data exceed expectations and the FOMC meeting minutes show a more hawkish tone than expected, the greenback may stage a rally across the market ahead of Friday’s key employment report due on Friday.

In this scenario, the dollar index could challenge this week’s lows around 96.45. On the negative side, if the NFP report surprises to the downside, the prices will see a solid retreat ahead of the weekend.

As such, EURUSD may either slip back below the 1.1300 figure or regain the 1.1345-1.1360 region, but a decisive break above 1.1400 looks unlikely in the coming days even in case of a sell-off surrounding the greenback. In a wider picture, the path of least resistance for the common currency remains to the downside due to a more hawkish Federal Reserve.

Later in the week, however, major equity indexes failed to preserve the upside momentum and corrected lower from all-time tops amid profit-taking. As a result, the S&P 500 ended the week with a loss of nearly 2%, while the tech-heavy Nasdaq Composite plunged 4.5%, its worst week since February.

Dollar unsettled despite hawkish Fed

Following a rally at the start of the week, the dollar index has steadied above the 96.00 figure, struggling for direction, but also deriving some support from rising US Treasury yields. The greenback rallied after the FOMC meeting minutes suggested that the Fed could raise rates more than three times this year and the balance sheet normalization to start sooner after the first rate hike than last time.

Meanwhile, Friday’s key report showed that Nonfarm Payrolls rose by just 199K in December versus the median forecast for a 400K rise. As the growth rate came in twice slower than expected, the US currency erased post-FOMC gains to finish the week slightly off local lows seen around 95.60.

As such, EURUSD steadied following the initial sell-off to jump back above the 1.1300 figure ahead of the weekend. The pair finished unchanged around 1.1360. The common currency failed to extend gains from late-2021 and could need a weaker dollar to regain the 1.1400 mark last seen in mid-November. Also, the pair stays well below the descending 20-week SMA, currently at 1.1540, suggesting the path of least resistance for the euro could be to the downside in the coming days.