Antipodean Capital Macro Strategy Daily Jan 17 - Long positioning, increasing rate cut expectations, and a multi day USD rebound have all weighed on AUD & NZD in the last 24hours. Expect a further retracement lower in both.

Price action: Precious metals: Gold & Silver have traded a narrow range now for nearly 2 weeks, consolidating near their highs. Our sense is that both are set to breakout, but so far lack a clear catalyst in weaker stocks or USD for doing so.

Price action: AUD & NZD: The FX markets recent outperformers became the underperformers last night, with AUD down 0.5% or more, and NZD down by nearly 1% at its low. Three things appear to be weighing. Firstly, short positions have largely been unwound and longs likely entered in the case of NZD. Local data has softened and expectations for rate cuts in both nations have risen. Thirdly, the USD has been rebounding for 3-4 days already, so a delayed response to that has crimped gains.

Summary: Markets in the US continued to rise, buoyed by solid earnings from US Banks (Goldman, BofA) offsetting other earnings misses. What data that was released came in marginally better (NAHB 59 v 58 last) and the economic impact of the US government shutdown continues to only be speculated upon, as gov’t data is not being released. In FX, the AUD & NZD were most harshly dealt with.

New trades: None.
FX: Short $JPY at 107.50 risk 110. Long EUR$ at 1.1360 risk 1.1260 target 1.18. Short NZDJPY at 72 risk 75. Long JPYKRW at 9.85 risk 9.76 target 10.30
BONDS: Long 2 units ASX Banks 5yr CDS at 54bps, target 140. Long NZ 10s short NZ 2s at 104bps risk 130bps target 50bps. Sold Portugal 10yr bought German Bund at 158bps, risk 110bps target 350bps. Bought US 10’s at 2.91% risk 3.1% target 2.6%. Sold HYG at 83.55 risk 85 target 80.
EQUITIES: Long ASX All Ordinaries Top 100, Short ASX Small Ordinaries at 0.81x ratio. Short US Banks Index at 93.25 risk 100 target 80. Stay short Dow Transports at 10375 risk 10800 target 8000. Bought Feb VIX at 20.2.
COMMODITIES. Long Silver short Gold at 83.9x risk 87 target 65. Long Silver 14.08 risk 13.85 target 14.80+. Bought Gold at 1243 risk 1230 target 1300.