COMMENT-Large speculative USD/JPY short could limit downside

March 4 (Reuters) - The size of the USD/JPY speculative short could prevent a steeper decline in spot. A larger speculative short position means there is likely to be a corresponding increase in bids and vulnerable buy stops that would likely hinder further falls.

The USD/JPY speculative short - derived from net contracts of International Monetary Market speculators - has grown to its largest level ever. For the week ending February 25, the value of net USD/JPY speculators' positions swelled to $8.05 billion short from $4.98 billion a week earlier.

U.S. President Donald Trump said he told the leaders of Japan and China they could not continue to reduce the value of their currencies, as doing so would be unfair to the United States. USD/JPY briefly slumped to 148.60 on Tuesday before staging recovery attempts. The recent 2025 low at 148.56 remains intact.

Last week's big USD/JPY slump broke but failed to close under the 149.23 Fibo, a 50% retrace of the 139.58 to 158.88 (September to January) EBS rise, a potential "bear trap". A bear trap is set when a market breaks below a technical level but subsequently reverses, and is usually a bullish sign.