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Yen, being a safe-haven asset, ran a significant rally on Monday, emerging as the strongest currency in the session as market players sold stocks and riskier assets such as commodities.

The Japanese currency held early gains today after core machinery orders surprised the market with an upsurge and producer prices waned monthly. Reported core machinery orders increased 4.9% month-on-month in July, marking it as the second consecutive monthly jump and beating a 3.5% decline forecast. Orders also presented a 5.2% surge year-on-year, outperforming the 0.3% increase estimated. The data underpinned strong growth in a key segment of the Japanese economy.

PPI numbers also displayed a decline of 0.3% in August month-on-month, topping the expected 0.2% fall. In a year-on-year basis, PPI dropped 3.6% that beat the forecasted 3.5% retreat. This weaker-than-expected producer prices signified continued stubborn inflation projections.

The Bank of Japan, in its quarterly Outlook Report issued in July, stated risks to its inflation prospects are lopsided to the downside as there is “considerable uncertainty” over global growth and longer0term inflation expectations in the Asian country.

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Dollar, Fed Rate Hike

Meanwhile, the dollar capped losses as it beat higher-yielding currencies such as its Australian counterpart on new speculations of a rate hike by the Federal Reserve in the near term, though the matter remains uncertain.

This event held the dollar steady, making it firmer versus most emerging market currencies.

Monday’s focus is on Fed Governor Lael Brainard’s speech. The timing of a speech by the central bank’s most eminent dove, which is just ahead the Fed’s Open Market Committee (FOMC) blackout period, is rather coincidental for many in the markets with some anticipating Brainard to drop a hint that additional tightening will be implemented.

“Brainard's speech will be the last scheduled appearance from a Fed policymaker ahead of the pre-meeting blackout period and many market participants see this as a last opportunity to for the Fed to fine-tune expectations ahead of the meeting,” analysts from Credit Agricole said in a note.

A sequence of Fed officials kept the flames burning for a rate hike this month, despite recently downbeat economic data, such as that of a meager uptick in US nonfarm payrolls.

USD/JPY Analysis

While the dollar has slightly recovered with a measly drop of 0.02%, the yen remained stronger as USD/JPY was in the red, down 0.82% to 101.89 as of 12:05 GMT. Overall, USD/JPY has been steadily treading lower since August 2015.

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On a daily time frame, it would be visible that many bearish candles touched the lowest Bollinger bands which consequently brought the pair lower overtime. Despite the breakouts, USD/JPY eventually fell back on a bearish trend.

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As of writing, the current bearish candle on the weekly timeframe has fallen off the two-week rally it has had. It remains volatile between resistance and support levels of 103.747 and 101.926, and the Bollinger bands are not quite narrowing yet so the price range can get wide. Indicators are pointing for a continued bearish path for USD/JPY, as do the fundamentals with the strong yen and a recovering dollar.

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