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What Earnings Season Means for the Euro

Monday, 7 Jan 2013 | 1:24 PM ET
Big Warning for Stocks
Ominous signs for the markets. Does the currency market see pain for stocks? The currency trade behind next week's earnings, with CNBC's Melissa Lee and the Money In Motion traders.

It's baaack.

Earnings season is here again, and if initial indications are right, it may not be pretty. Companies have been offering cautious guidance ahead of the release of their fourth quarter results.

"There are a couple of supports for earnings season" that have kept down input costs, notably lower oil prices in the fourth quarter and a weaker broad dollar, according to Rebecca Patterson, chief investment officer at Bessemer Trust. That said, she is not optimistic heading into earnings reports, she told CNBC's Melissa Lee. "I'm not looking for great news in the coming earnings season, but I think low expectations, lower input costs for some companies - it'll be a mixed bag, but nothing special."

(Read more: Fourth Quarter Earnings Outlook)

Andrew Busch, global currency and public policy strategist at BMO Capital Markets, is also relatively downbeat. While he thinks investors could be cheered initially if companies beat admittedly lackluster forecasts, he is more focused on companies' outlooks going forward. "My guess is, at some point we'll get disappointed with what's going on," he says. "Reality has to be there." Housing could be strong, he says, but "if we falter anywhere in here, there's a lot of reasons not to be excited."

Brand New Images | Digital Vision | Getty Images

Busch thinks stocks will fall and meet up with bonds, which have been weak recently.

He also thinks this is a good time to sell the euro against the dollar. He wants to enter the trade slightly higher than current levels at 1.3125, setting a stop at 1.3175, and he is looking to hit a target of 1.2975.

Over to you.

Tune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm and repeats on Saturdays at 7pm.

Learn more: The essential vocabulary for currency trading is on Key Terms Dictionary. Top currency strategies are broken down for you in Currency Class.

Talk back: Tell us what you want to hear about - email us atmoneyinmotion@cnbc.com.

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