• The euro initially did try to rally a bit against the US dollar, but you can see it has gotten hammered since then.
• Ultimately, this is a pair that will be watching very closely.
• The 1.08 level is a large, round, psychologically significant figure and an area that has been important multiple times.

Ultimately, I do think this is a situation where traders will look at this through the prism of a market that, quite frankly, just doesn't really know what to do. After all, interest rates in Germany had spiked and that was a big driver of the euro higher. But if they start to fall off, that sends the euro much lower.

There's also a lot of concerns out there geopolitically, and that works in favor of the US dollar on the whole. But ultimately, I think you've got a scenario where traders are going to be very cautious but also very erratic at times, with volatility picking up here and there. Today definitely seems to be one of those days where volatility has picked up.

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Three Days in a Row

And so, this is the third day in a row that we've seen a lot of ugliness in this pair. I think you've got a real shot at a potential breakdown, but we need to see a daily close below the 1.0775 level to see a little bit of confirmation for that. Otherwise, we just simply stay in the same area we have been in, bouncing around and trying to sort out where we are going next.

The consolidation would make a certain amount of sense if you thought about it. I mean, after all, we've seen the euro go straight up in the air, so why would it continue in perpetuity? I do think that you need to work off some of the froth here, and once you do, then you have a real shot at perhaps making a run towards the 1.0950 level. A break above that, of course, would be very bullish, perhaps sending the market to the 1.12 level over the longer term.

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