Strength in the Euro puts winds in the sails of European equities.

Currency relationships give us important insights into the flow of capital across borders and economic zones. Developed market equities, particularly Europe and Japan, have done well this year, so it's not a surprise to see their respective currencies performing well relative to the US Dollar. On its long-term 1% chart, the Euro/U.S. Dollar Cross Rate (EURUSD) broke out to new multi-year highs after taking out strong resistance from 1.115 to 1.267 in April. EURUSD pulled back to its old resistance area in May but this old resistance has turned into new support for the time being which is a good sign for European equity bulls. While European equities have had plenty of short-lived relative strength periods over the last few years, the EURUSD has plenty of room for further improvement before hitting its 2018 and 2021 highs which can lead to further relative strength in European equities.

Moving on to European equities, the iShares MSCI Eurozone ETF (EZU) has a near-perfect 5.65 fund score and recently made a multi-year high. The new high for EZU points to the recent relative strength of European equities relative to domestic equities, which have yet to take out their 52-week highs. EZU is nearing heavily overbought territory with a weekly overbought/oversold reading of 69%, but the technical picture is overwhelmingly positive. Another positive for developed market and momentum investors is that the relative strength picture within developed markets has been very strong over the last few years (click here for more), so there are opportunities to implement a relative strength framework on international equity exposure.