USD/JPY continues to recoup lost ground after collapsing 3% from the June high (109.85) before reacting to the psychologically imposing 106-handle.

Initial development in the RSI late last week suggested price would continue to breakdown, but the steep reversal prior to oversold readings could see USD/JPY work its way back to the 200-day moving average (108.21).

Having said that, the momentum indicator has diverged from price and its fellow technical oscillator, hinting at an underlying degree of bearishness in USD/JPY, which could see the exchange rate reverse at the February downtrend as its done on two previous occasions.

Reaction around the 200-MA (108.21) could provide a key tell for future direction, with the inability to clear the sentiment-driving moving average possibly signalling a reversal of the 5-day rally.