The Japanese Yen surged to fresh monthly highs against all of the majors. The last time we saw trading ranges of this magnitude was back in October 1998which was the year that Russia defaulted on its debt and Long Term Capital faced major losses. At the time, the Federal Reserve responded with multiple interest rate cuts. The moves over the past few days still pale in comparison to the moves in October 1998 where EUR/JPY fell 2,878 pips over the course of a four trading days.
Since August 9, from high to low, EUR/JPY is down only 1,526 points. The VIX index also jumped to the highest level since 2003, which means that traders in general remain risk averse. However the late afternoon rebound in US stocks suggests that we could see a similar rebound in the Yen crosses as long as the Nikkei does not collapse. However even if we do see a few hundred pip reversal in the Yen crosses, that would not necessarily erase the overall downtrend. Instead, traders need to continue to exercise caution in current market conditions. Big moves like today is one of the main reasons why it is important to use stops and low leverage.