Traders' Yen Shorts Built Ahead of Sharp Reversal

Futures traders built their largest Japanese yen net-short position in months just ahead of a sharp yen surge, according to the latest COT report. Large speculators increased their net-short exposure to the yen by 29.9k contracts to 92.2k contracts by last Tuesday.

The move appears to have been bearish for USD/JPY, but price action on the pair suggests that it may be within a larger impulsive move lower. The path of least resistance could be lower over the coming months, and traders may seek to fade into rallies.

In contrast, US dollar net longs fell for a fifth week, though only by $0.8 billion to $25.4 billion. EUR/USD net shorts also eased to a six-week low of 25k contracts among large speculators.