EUR/USD: Clean Breakout Above 1.1720 Cannot Be Ignored

The major breakout above the 1.1720-30 liquidity area last Thursday is a clear bullish technical development for the pair. Find below all the pros/cons as the chart and correlations stand:

Pros:
- Thursday clean break closed at the highs of the day on high volume vs lower volume and smaller candle on Friday. Conductive for a trend continuation.
- The 8-day sma points out at the extension of bullish trend dynamics.
- The reflationary environment (higher sp500 & higher DM bond yields) are bearish for the USD and the main reason behind underperformance in USD.
- The Italian vs German 10-yr bond yield spread remains near lowest since early June. Risk of existential threat for EU emanating from Italy lower.

Cons:
- The German vs US 10-yr bond yield spread screams great value adding macro shorts. Short-term, it collides with the notion of US failing to import sufficient capital on higher global yields
- At least a retest of the breakout area at 1.1720 if not lower should be expected ahead of the FOMC.
- As the yield spread stands, a resumption of the bullish trend sees limited room to appreciate, but so far no clues via price action.

Trade safe!