The Japanese Yen has become extremely volatile overnight, due to a variety of factors.
1) Risk Aversion. Moody's Investors Service cut ratings on $5.2 billion of bonds backed by U.S. subprime mortgages, and S&P announced that it may downgrade $12 billion worth of subprime sludge. If hedge funds and other investors are forced to meet margin calls, they will liquidate their profitable carry trade positions.
2) Bank of Japan. The BoJ will announce its decision on interest rates this evening. While no change is expected, we may hear hawkish comments from BoJ officials, who are expected to raise rates in August.
All of this volatility has created some wicked looking potential hammers (potential because we never assume that we know how an open candle will close!), like the one on the daily GBP/JPY
