Price action fell sharply after a strong reversal near the highs of 114.52.

The decline in the USDJPY came alongside the market sentiment.

Last week, the U.S. equity markets tried to recover following the sharp sell off the week before.

However, the markets continue to remain frothy.

Amid this backdrop, the USDJPY will be the currency pair to watch in case the market sentiment turns sour.

Given the strong gains notched so far, we anticipate a near term correction in USDJPY that is well overdue.

From a technical stand point, the USDJPY has been attempting to rebound off 111.70 level.

This rebound could see price action rising to retest the level at 113.35 region.

A retest of this level to establish resistance could potentially mark the end of the decline.

Watch the daily Stochastics for further clues of the oversold level when USDJPY hits this area.

In the coming weeks, we expect the USDJPY to potentially weaken if it does not break past the previous highs.

To the downside, watch for the support at 111.71. A break down below this level could indicate further decline.

In the longer term, USDJPY might be ripe for a correction down to 107.37.