On the ECB interest rate decision last Thursday, the EURUSD fell below trendline support on the hourly chart (see chart above). That break failed and the price rocketed back higher.

Yesterday and today we are seeing the EURUSD step lower in more controlled but trend like selling. Yesterday’s step lower found support near the 1.3585 level. This level corresponds with lows going back to May 28th. It is also near the 50% retracement of the move up from last Thursday’s low to the high that we saw on “US Employment Friday” (at 1.35892 – see chart above).

Today, the market broke from the 1 3585 level and moved down to the old support trendline (see chart above). Traders used the level to take some profit (or so it seems). Looking at the 5 minute chart below, the bounce has taken the pair to the 38.2% retracement area of the move down from today’s high to today’s low. Stay below this level in the bears remain firmly in control. Move above the 38.2% level, and then above the 50% retracement level at 1.35668 (see chart below), and the trend becomes suspect.

The burden on a trend is for the countertrend traders to prove that they can take back control. Until the 38.2-50% can be broken (at 1.35587-1.35668) the sellers are the aggressor and the longs are fearful. Note that there may still be buyers /profit taking against the key support line – so be aware of that – but also recognize that a break of that support level, should solicit more momentum selling (the trend remains the friend).

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