The U.S. dollar index, a weighted geometric index of the value of the U.S. dollar relative to a basket of six major currencies, has been moving sideways in the narrow trading range between 96.27, or the 50% Fibonacci retracement level, and 97, during the week as the currency markets are weighing the Greek debt crisis, the slowdown in China’s economy, the turmoil in the Chinese stock markets as well as the weak U.S. economy. 

The argument that the euro will become stronger without Greece, is back on the front burner again this week as newly appointed Greek Finance Minister Euclid Tsakalotos showed up at a eurozone finance ministers meeting on Tuesday in Brussels without any new proposals. Greek Prime Minister Alexis Tsipras had been given less than 48 hours to draw up reform proposals by the eurozone finance ministers and was given an ultimatum to reach a deal by the end of the week, or face a Grexit.

Greece submitted the debt reform proposals just in-time before the Thursday deadline at midnight CET. Germany might give Greece a break as German Finance Minister Wolfgang Schäuble just said that Greece would need some debt restructuring as part of any new loan program to make its economy viable. There is still more than a 50% chance that Greece will be exiting the European Union if there is no bridge loan approved by this week, as the ECB keeps the emergency liquidity assistance (ELA) ceiling at €88.6 billion and the Greek banks are shut.

The U.S. dollar index fell after the release of the minutes from the Federal Open Market Committee (FOMC), which warned about the pace of growth beyond the U.S., specifically in China, as well as turbulence that could result from the Greek debt crisis. 

The International Monetary Fund (IMF) said on Thursday that it trimmed down its expected global growth for 2015 to 3.3% from 3.5% growth, citing weaker-than-expected economic activity in the U.S. during the first quarter. The IMF gave a warning to the Federal Reserve, for the second time, that it risks stalling the U.S. economy by raising interest rates too early and called for the central bank to delay a move until 2016. Last month, both the IMF and the World Bank urged the Fed not to hike the rate until 2016.

Charles Evans, the president of the Chicago Federal Reserve, told a group of reporters at a breakfast meeting on Thursday, that he doesn’t want to increase interest rates until mid-2016, citing risks from Europe, China and emerging markets.

In fact, the U.S. economy is showing some signs of weakness again. The Institute for Supply Management (ISM) said on Monday that its non-manufacturing index rose to 56.0% last month, from 55.7% in May, missing Wall Street's expectations of a 56.3% rise. A reading over 50% indicates more companies are expanding. Their Employment index fell to 52.7% from 55.3% in May, reflecting growing employment levels from May at a slower rate, said the ISM.

The U.S. Department of Labor said last Thursday that the June jobs numbers came in with a 223,000 increase, below estimates of a 230,000 gain. The Department of Labor also said more than 400,000 people left the labor force, pushing the labor force participation rate to a 38-year low at 62.6%. Average hourly earnings, the most Fed’s watched data, remained unchanged at $24.95, as higher paying manufacturing and construction jobs showed no change over the month. 

From the labor force participation rate and average hourly earnings, the U.S. Federal Reserve may have to think twice about raising the rate by September. The Fed may be risking losing their credibility if they decide to ignore the warnings and hike the rate in September, and it botches the U.S. and global economy next year.

From our technical viewpoint, the U.S. dollar index has been moving in a rising bearish wedge since mid-June. A breakout of the rising wedge and the technical head resistance at 97.61 could confirm the double bottom at the 93.39 level, seen in mid-May and mid-June. The projected level of the U.S. dollar index for the confirmed double bottom is 101.83. A positive outcome of the Greek debt deal without concrete reform plans, meaning Greece still remains as an EU member without agreeing to sweeping sales tax hikes and pension cuts, could be seen by the currency markets as kicking the can down the road. 

The weak inflation and U.S. economic data suggests that the Fed’s rate hike may be off the table until next year. That means the index could possibly fall back to the 93.39 level, if the Fed delays the rate hike lift-off.