USD/JPY Unwind Driven by Historic Clear-Out of Yen Shorts

The USD/JPY exchange rate has seen a significant unwind over the past couple of weeks, driven in part by a massive clear-out of short-yen positioning among speculators. The latest data from the CFTC shows that net speculative positioning swung from around 92,000 contracts short to almost 11,000 contracts long in the week to September 8.

This shift is enormous and provides insight into how aggressively speculators have shifted over recent weeks. Historically, such reversals have often led to further yen strength, with USD/JPY lower one week later in 60% of instances, two weeks later in 93%, and four and eight weeks later in 67% of cases.

The technical picture for the pair continues to favour a bearish bias, with a string of lower highs and lower lows intact, medium and long-term moving averages flattening out or beginning to roll over, and the price beneath all three. RSI (14) sits around 30, while MACD is pushing further into negative territory after already staging a bearish crossover.