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Earnings Season; Yummy.

Written by A Forex View From Afar on Sunday, January 13, 2008

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Markets find themselves already in the middle of January, and that means that they are heading straight into the Equity Earnings Season.
Usually, Forex Traders don't put too much importance on Earnings Season, but this year it is something that will define the Sentiment for weeks, and possibly months to come. The reason? The Credit Crisis.

Traders will be looking for the Earnings reports of Financial Institutions to confirm whether Market expectations are anywhere near to reality. This coming week Citigroup will publish it's earning for Q4, the period that it announced that it was hit by sub-prime. The Markets are expecting a $1 loss per share

The following week Merrill Lynch & Co Inc will publish its earnings. Merrill has an EPS of -4.57 down from 2.02 in June 2007. Things don't look rosy. However, this year Analysts have reduced income expectations, so it’s very likely that some Companies will handily beat those expectations.

For Forex Traders, a strong Stock Market will be a one way ticket to 1.5000 on the Euro, (and maybe 1.6000), and lower on the Swissy, Cad and Aussie; all as Trade Desks move out of the safety of Bonds, and take on risk again. Strong Earnings may sky-rocket the Commodity Markets, maybe then showing that consumers are still spending, and Commodities still have strong demand. The 'last but not least' line goes to the Yen; Equities Higher = Yen Cross Pairs Higher, (and they need a boost to clear the Daily Chart Log-Jam).

You can see some important earnings releases here:

Watch out; during Earnings Season you never know what the following morning brings!

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