In the cloud you can not read from a local directory. But you can process files that have been uploaded to the environment. See this part in the documentation:
Starting at version 3 the module has been expanded with a queueing mechanism to allow for files that are stored in your Mendix app to be processed in the same way files from directories can be processed. To use the queueing mechanism just select the use internal queue option in the configuration and fill in the other fields. To import the files from the queue just add the file in the correct queue either by a function (microflow) or manually.
So create an upload mechanisme so you can upload the file and then process the file.
Regards,
Ronald