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Forex pairs in this Article » USD/JPY (Barcelona) - One of the main themes developing in the FX market is on Yen crosses and the ability to take off again in strong fashion, at a time when markets celebrate the 1-yr anniversary since the aggressive JPY cross buying began.

A large sector of the market appears to have turned enthusiastically Yen bearish again, as technical evidence mounts following a key technical breakout from a 6-month lengthy triangle in USD/JPY. However, one should not overlook a key take-away from recent publications on market positioning, that is, specs continue heavily short Yens.

As Nomura reports: ""Specs sold -$2.6bn of JPY on the week, bringing shorts to -$11.9bn.This is the most net short JPY spec positioning has been since May 28 though it was close also throughout September. Our real time estimators suggest that specs added to their JPY shorts further through the end of the week, bringing total positioning to -$12.6bn by Friday."

Unlike in Oct/Nov 2012 - onset of the rally -, when the specs community had little exposure to Yen shorts, thus helping explain the incredibly aggressive rally in all things Yen crosses, this time around, specs are loaded with sizeable short positions, which suggests the market is susceptible to a significant short squeeze should conditions turn positive for the interest of the Yen.

Also, what the current specs positioning translates into is that even if there is no evident short squeeze, losses in the Yen are unlikely to come by at such radical pace unless there is a re-adjustment in equilibrium between specs/commercial forces.
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