Avoid European Stocks Until the Euro Stops Falling

On January 22nd, the European Central Bank announced the start of its Quantitative Easing (QE) program that will involve a larger than expected 60 billion Euro asset purchase per month. The Fidelity Europe Fund (FIEUX) responded with a rally, but it has not yet cleared the resistance level (see blue line on the chart):

fieux

At the same time, the Euro continued to drop against the dollar, which explains why European stocks are less attractive in U.S. Dollar terms:

fxe

The picture is completely different if we look at European equities in Euro terms. This chart shows a very bullish break out:

fieux-fxe

Read more about investment strategies at FidelitySignal.com

.

 

European Markets in Downtrend

Both weakening economic conditions outside of the U.S. and geopolitical risks have caused the dollar to strengthen against all major currencies since May, including the Euro:

fxe

The weak Euro coupled with renewed fears about recession in the Eurozone have negatively impacted European equities. Prudent investors may want to avoid investing in European equity markets until the downtrend reverses.

fieux

 

View buy and sell signals at FidelitySignal.com

.