In times of risk appetite, funds usually flow out of the safe-haven yen, putting the short USD/JPY position under threat.
World stocks and risk currencies rallied on Tuesday's encouraging global economic data and assurances from U.S. President Donald Trump that the U.S.-China trade deal remained "fully intact" after confusion over its fate had emerged nL8N2E01X9.
The USD/JPY speculative short position has grown, according to IMM data -- the week ending June 16 showed a futures market short an equivalent cash USD/JPY position of $2.58 billion, up from $2.03 billion the previous week.
EBS flow data since June 16 shows USD/JPY shorts may have grow even more.
USD/JPY shorts will be squeezed if there is a daily close above the 107.35 Fibo, a 23.6% retrace of the 109.85 to 106.58 drop.
Those short will hope USD/JPY fails to close above the daily cloud, which currently spans 106.45-107.04.