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, surged 0.90% to an intraday high of 97.035 on Monday after Greek Prime Minister Alexis Tsipras finally capitulated and accepted the framework for the third bailout negotiations, after 17 hours of European leader talks on Sunday. It is not a done deal yet, as Mr. Tsipras needs the Greek parliament vote in the next 48 hours to approve the package of reforms. Germany's Bundestag lower house of parliament will likely vote on Friday on whether to allow Angela Merkel’s government to start negotiations with Greece. 

Meanwhile, the Greek banks are still shut and a 3.5 billion-euro debt payment to the ECB is due on July 20. The euro sell-off on Monday doesn’t look good as the currency market could be sending a signal that Greece’s third bailout deal is another kicking the can down the road.

On Friday, Federal Reserve Chair Janet Yellen said in a speech that she expects the Fed to raise interest rates at some point this year, but pointed strongly to her concerns that U.S. labor markets remain weak and that more workers could be encouraged back into the job market with stronger growth. Her comments sparked a bond sell-off on Friday sending the U.S. 10-Year Treasury Note yield tumbling 4.34% to 2.401% and the U.S. dollar index down 1.27% to an intraday low 95.555. 

Despite urgings from the IMF and the World Bank for the Fed not to hike rates until 2016, some Fed members are eager to hike the rate in September as they may be concerned to fall behind the curve. Another concern is that the Fed could be running the risk of losing control of bond yields if they don't do anything after a lot of hype. Since the Fed's committee removed the key word "patient" from its March 18 statement, the 10-year U.S. Treasury yield has skyrocketed 24.35%, from 1.93% on that day, to 2.4% on Friday. The U.S. dollar index, on the other hand, got knocked down 2.64%, during the same period.

The U.S. Commerce Department will release the data for June retail sales on Tuesday, July 14. Wall Street’s economists expect retail sales to rise 0.2% in June, compared to a 1.2% surge in May. Stronger-than-expected U.S. retail sales data for June could support expectations that the Federal Reserve would begin hiking rates in September.

The European Union's statistics office said earlier this month that the eurozone May retail sales rose 0.2% from April, and were up 2.4% from May last year, beating a Wall Street Journal poll of economists forecast for a 0.1% rise. Robust consumer demand in the eurozone prompted Standard & Poor's Ratings Services to raise its eurozone growth forecasts to 1.6% in 2015 and 1.9% in 2016, from its 1.5% and 1.7% forecasts made in March.

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 depend on the U.S. retail sales data on Tuesday and 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 after the confirmed double bottom is 101.83. 

A third bailout deal for Greece with tough austerity measures, if approved by the Greek parliament and Germany's Bundestag, could be seen as positive for the euro. The dollar may also be under selling pressure as the Fed rate hike talks continue to heat up, which then drives the 10-year U.S. Treasury yield to test the head resistance at 2.66%, or the 23.6% Fibonacci retracement level.