Continental Currency Futures Nosedive

Inflation rose in Europe at a 2.4% annual pace last
month, leaving the impression that the European Central Bank will raise interest
rates. With interest lower in Europe than in the US, interest rate rises would
normally be positive for euro FX futures and Swiss francs. But the news is being
perceived as negative for European currencies because it is believed that higher
rates will strangle continental economic growth. Both the Swiss franc
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and euro FX
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are down sharply — .00930 and .0053,
respectively — and are making good on Pullback From
Lows
futures setups. 

Meanwhile, the dollar index
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is up sharply and
making good on its Pullback From Highs
setup, up .72 to 110.73. The euro is the currency most heavily weighted on the
dollar and therefore exerts the largest impact. Traders are also viewing
Friday’s widening in the June trade deficit figures as dollar positive because
it shows consumer demand remains strong in the US, a factor that underpins
economic growth. 

Also from the Pullback From Highs
list, September T-bonds
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are ratcheting above their pivot and are up 11/32 to 100 4/32.

Call it dollar strength or a reaction from a 10-day high,
December gold
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is down 2.1 to 280.5. Gold is denominated in dollars
and a rising dollar makes gold relatively more expensive. Following in tandem,
silver
September silver
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is trading at a contract low.