EUR/USD: These Factors Argue Against Break of Macro Resistance

The 10y spread between Germany and the US is a stepping stone for further progress in the exchange rate, with a source of concern also Italy and German 2-yr yield spreads, exhibiting a major divergence with price action in EUR/USD. It's difficult to foresee a break of the macro resistance above amid the negative divergence in 3 out of the 4 most correlated assets in the EUR/USD.

The more that the EUR/USD continues to appreciate while out of whack with the rest of correlated assets, the higher the risks of topside reversions back to the mean. Should this pattern of lower German vs US yield spreads extend and the Italian yield premium increase further, it's hard to justify a Euro at these hefty level without a more meaningful correction.