The US dollar suffered its worst monthly performance since September 2023 in April 2026, weighed down by the unexpected FOMC dissent split, renewed yen intervention, and geopolitical uncertainty. However, seasonal patterns and incoming data releases suggest a potential recovery in May.
Seasonal Tailwinds
Historically, the dollar index (DXY) has posted positive returns in May in seven of the last ten years. EUR/USD, the dollar's largest counterpart, has averaged a monthly decline of 0.6% in May over the past 50+ years — suggesting seasonal headwinds for the euro.
Five Key Events for Dollar Direction
- ISM Services PMI (Tuesday, May 5): A reading above 52.0 would suggest US service-sector resilience and support the dollar.
- Fed Speakers (throughout week): Post-FOMC communications from Powell and regional presidents will be watched closely for any softening of the hawkish hold.
- Iran Nuclear Talks (ongoing): Any progress could ease oil prices, reducing stagflation fears and allowing the Fed more room to hold — dollar positive.
- US Nonfarm Payrolls (Friday, May 8): The biggest weekly market mover. Consensus expects 165,000 new jobs; a beat would reinforce dollar strength.
- BOJ Communications: Any signal of a July rate hike from BOJ officials would weigh on USD/JPY even without intervention.
Technical Outlook
The DXY is attempting to hold support at 101.80 after breaking below the key 103.00 level in April. A recovery above 103.50 would signal the rebound thesis is underway. Failure to hold 101.50 opens a deeper correction toward the 100.00 psychological level.