1.40 holds key for any euro gains

NEW YORK (Forex News Now) – The euro has seen a recently emergence as the currency of choice, especially against the U.S. dollar. As fears of the European banking crisis abate, the world has been buying the euro, mainly as a way of getting out of dollars.

The FX rate of this pair often will show what the world is thinking of the dollar more so than euro strength. This is currently one of those times that FX traders have been showing their displeasure with “King Dollar” as the U.S. government and Federal Reserve have made it clear that they have no interest in reigning in excessive spending.

As such, FX traders find themselves at a crossroads.

The 1.40 handle has been significant support and resistance several times over the years, and this year is certainly no different. It is at this place that FX traders will make their judgment on the U.S. dollar, and that the euro might find itself benefiting from America’s misfortunes.

As shown on the chart, there was a parabolic move upwards in the euro / U.S. dollar pair, and a break of that trend line. However, just as currency pairs can break a trend line, consolidate, and break down the trend, they also are perfectly capable of just consolidating before a move up.

The pair has clearly defined boundaries at the moment, and as such should be easy for FX traders to trade. There is a clear heavy resistance area at 1.40 that is weighing on it.

At the same time, there is significant support at 1.37. This pair has been stuck between two levels for a couple of weeks. Any daily close above or below either level shows the direction of this pair for the intermediate term.