A strong payrolls release this week, "Has the potential to induce a major move in the greenback, particularly as the latest data suggest America's economy is emerging from its winter slowdown," Mansoor Mohi-uddin, UBS head of foreign exchange strategy, said in a report on Saturday.
UBS Economics forecasts March's manufacturing ISM will increase to 54.0, in line with Reuters estimates.
Still, Westpac's Callow warned not to expect too much from this week's data, and said current expectations were set too high.
"Scope for a dramatically better than expected ISM and payrolls read ... seems constrained, with consensus looking a touch too optimistic," Callow said. He added that he was bullish on the dollar this week "but only moderately."
Ray Attrill, co-head of currency strategy at National Australia Bank, was also cautious, and advocated a neutral stance towards the dollar this week.
"Payrolls could be the last chance saloon for a stronger dollar in April," Attrill told CNBC in an email. Barring a really strong number of 225,000 or higher in payrolls gains, "There's probably more U.S. dollar downside on a weak print, than upside on an okay one, so the opportune trade may be to be short into the number."
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Ahead of the jobs report, currency markets will focus on scheduled remarks on Monday from Federal Reserve Chair Janet Yellen, who will speak in Chicago.
"Traders will listen carefully to glean the tone of the central bank chief's rhetoric for confirmation of the relatively hawkish tilt noted following the March FOMC (Federal Open Market Committee) meeting," said Ilya Spivak, currency strategist,at FXCM Live. "Needless to say, the presence of such cues is likely to bode well for the U.S. dollar."
Yellen did not make a "mistake" when she said that the central bank would start raising interest rates around six months after its bond-buying program ends, Philadelphia Federal Reserve Bank President Charles Plosser told CNBC last week.
UBS was also taking Yellen's signals on policy direction at face value.
"This month's Federal Open Market Committee meeting has primed the dollar for a major rally over the next few weeks," Mohi-uddin said. "Policymakers have raised the risk that the first Fed rate increase may be only one year away now. Thus currency markets are likely to react strongly to a faster rebound in U.S. data over the next couple of months."