US Dollar stabilizes as mixed Chinese data weigh on sentiment

• US Dollar holds its ground early Monday after having suffered heavy losses last week.
• US Dollar Index fluctuates in a tight channel slightly below 100.00.
• US economic docket will not offer any high-impact data releases. 

The US Dollar is managing to stay relatively resilient against its major rivals at the beginning of the week as markets adopt a cautious stance. The US Dollar Index (DXY) moved up and down in a tight range slightly below 100.00 on Monday after having lost more than 2% last week.

The US economic calendar will not feature any high-tier macroeconomic data releases that could impact the DXY's movements. Hence, the risk perception could continue to drive the US Dollar's valuation in the second half of the day. 

China's real Gross Domestic Product (GDP) expanded at an annual rate of 6.3% in the second quarter, according to the release from China's National Bureau of Statistics (NBS) early Monday. This reading followed the 4.5% growth recorded in the first quarter but came in below the market expectation of 7.3%. Citigroup announced that they had lowered the full-year growth forecast for China to 5% from 5.5%. The Shanghai Composite lost nearly 1%, and US stock index futures traded in negative territory, reflecting the souring market mood.

Daily digest market movers: US Dollar is not out of the woods yet

• The US Dollar weakened last week as soft inflation data from the US revived expectations about the Federal Reserve reaching the terminal rate with a 25-basis-point (bps) rate hike in July.
• The Consumer Price Index (CPI) in the US rose 3% on a yearly basis in June, following the 4% increase recorded in May. The annual Producer Price Index (PPI) edged 0.1% higher in the same period.
• Commenting on the USD's outlook, "In case of an increasingly rapid fall in inflation and weakening economic data, the market might increasingly rely on key rates not remaining at high levels for a long time, whereas rate cuts before the end of the year are becoming increasingly likely," said Antje Praefcke, FX Analyst at Commerzbank. "That would cause the USD to ease further." 
• The University of Michigan reported on Friday that the Consumer Confidence Index improved to 72.6 in July's flash estimate from 64.4 in May.
• The benchmark 10-year US Treasury bond yield holds steady at around 3.8% after having declined nearly 6% last week.
• The Federal Reserve Bank of New York will release the Empire State Manufacturing Survey for July.
• Markets are nearly fully pricing in a 25 bps Fed rate increase in July. The probability of one more rate hike in December stands at around 20%, according to the CME Group FedWatch Tool.
• Other data from China showed that Retail Sales increased 3.1% on a yearly basis in June, down sharply from 12.7% in May, while Industrial Production expanded 4.4% in the same period.

Technical analysis: US Dollar Index remains technically oversold

The US Dollar Index (DXY) closed in positive territory on Friday but struggled to extend its rebound on Monday. The Relative Strength Index (RSI) indicator on the daily chart remains below 30, suggesting that the DXY is still oversold. Hence, sellers could wait for a technical correction before betting on further USD weakness.

On the upside, 100.00 (psychological level) aligns as first resistance. A daily close above that level could open the door for a rebound toward 101.00 (former support, static level). 

99.20 (static level from March 2022) could be seen as the next bearish target once the DXY completes a correction. Below that level, 99.00 (psychological level) is likely to act as interim support before 98.30 (200-week Simple Moving Average).