Speculators are now the most long on the U.S. Dollar in more than a decade
Source: Barchart
Bessent’s selling of EUR to buy JPY, and US threats to weaponize USD stablecoins against the EU may be triggering some unforeseen blowback.
Source: FT, Luke Gromen
US intervention has failed this time
USD/JPY is now back to the same level where the US intervened to strengthen the yen. Also, USD/JPY rallied almost 0.9% yesterday, its biggest daily gain in 5 months. At this pace, we might see USD/JPY above 164 in a few weeks again. Source: The Macro Paper
Japanese yen weakened past 158 per dollar.
Japan’s current account unexpectedly swung to a ¥923B deficit in June, its first since January 2025, versus expectations for a ¥1.512T surplus. Yen is currently the weakest G-10 currency in August as the effect of the joint US-Japan intervention fades. Bank of Japan also flagged rising inflation risks in its July summary of opinions, with one board member saying rate hikes could come faster. Source: Bull Theory
$8.3 Trillion is now sitting in money market funds, an all-time high
Source: Barchart
TRADERS ARE BETTING AGAINST THE YEN AT THE SECOND HIGHEST LEVEL EVER RECORDED
And this is happening just days after Japan and the US spent an estimated $88 billion trying to stop the yen from falling. Combined net short positions from asset managers and leveraged funds hit -205,000 contracts as of July 28, just short of the 2024 record. Hedge funds alone are the most bearish since 2007. The intervention happened, and traders went right back to shorting. Source: Bloomberg, Bull Theory
THE WORLD'S MOST DANGEROUS TRADE IS GETTING EVEN MORE CROWDED.
Leveraged funds are now holding their largest short position in the Japanese yen since 2017. They're borrowing ultra-cheap yen to buy higher-yielding assets, particularly U.S. technology stocks, making the yen carry trade more crowded than it has been in years. The risk is what happens if the yen suddenly strengthens. A sharper yen forces investors to buy back the currency to repay their loans, triggering rapid deleveraging across global markets. We've seen this before. In August 2024, the yen surged roughly 14% against the U.S. dollar, sparking a violent unwind of carry trades. More than $6 trillion was erased from global equity markets, and panic selling reached levels not seen since the COVID crash. Today, speculative positioning is even more extreme. That doesn't guarantee another unwind—but it does mean the market is more vulnerable if the yen stages another sharp rally. Source: The Macro Paper
U.S. Dollar does it again 🚨 15-Year Trendline cannot be defeated
Source: Barchart
