Markets are struggling with some of the drama of the past two weeks today. Japan is on holiday today, and the US economic calendar is empty, so this is a good time for markets to catch their breath.
But what is striking is that the yen has become weaker overall with USD/JPY rising 98 pips to 147.60. It appears that long interest traders are starting to pull back after the rout that culminated in a drop to 141.67 last week.
JPMorgan issued a note over the weekend suggesting that 65-75% of trades were liquidated in the USD/JPY decline, though they noted that this was a highly uncertain estimate. This echoes data from the Commodity Futures Trading Commission released on Friday that showed net short positions in the yen fell to 20.4K from 118K at a peak in July. This is the most balanced since 2022.
Short interest trades are also performing well as volatility and risk aversion are low. S&P 500 futures are up 10 points and yields are up 1-2 basis points across the curve.