There was a glimmer of hope for the euro bulls last Wednesday when US CPI undershot. It led to what looked like a powerful upside break in the three-week euro range.
Unfortunately, by the end of the day on Wednesday, the euro had already given back much of the upside. As it was unfolding, both me and Greg highlighted the bearish price action. There was a second push on Thursday but when it failed to challenge the previous high, it was a giveaway at the underlying direction of the market and a sign that the strength was an illusion.
The confirmation came on Friday and today. Now we're squarely back in the box and the bears have to be feeling pretty good.
Ultimately, this is all about European power. Today, Dutch TTF natural gas prices are up 3% in what could be the highest close since March.
Here's a look at German year-ahead electricity, which are up six-fold in a year:
It's the same story in France and much of the continent. Governments will try to cushion prices but there's only so much they can do.
It's starting to hit home. Here's a viral vide of an Italian ice cream maker showing off an electricity bill for €5128 compared to €1371 a year earlier. It's on the beginning.
If the broader market shifts back to a negative tone, then the euro declines could still go a long way. Some are pointing to a faster filling of German gas storage as bullish. But even if it hits 100%, the historical winter drawdowns compared to years when it was still receiving inflows via Nord Stream 1 at 100%. They're stuck at 20% now so the gas will still run out.
The whole power situation is increasingly at risk of voters turning against governments as well.