Why is this “extreme short” positioning significant?

[ed]

History shows that when hedge funds pile into extreme USD shorts, it often precedes a rebound rather than a sustained decline. Every major episode of heavy shorting in the last 20 years has ended with a dollar bounce, forcing traders to quickly unwind positions.

[Abdul Khan]

Extreme shorts often lead to violent reversals when sentiment changes.

[Nahid Hossen]

It reflects how traders are heavily betting on USD weakness.