• USD/JPY witnessed some selling for the second successive day on Thursday.
• A softer risk tone benefitted the safe-haven JPY and exerted some pressure.
• Bulls largely shrugged off a dovish BoJ outlook on GDP growth and inflation.

The USD/JPY pair remained depressed heading into the European session and was last seen hovering near the lower boundary of its intraday trading range, around mid-113.00s.

The pair struggled to capitalize on the previous day's late rebound from the 113.40-35 area, or near two-week lows and met with some fresh supply on Thursday. This marked the second successive day of a negative move and was sponsored by a weaker trading sentiment around the Asian equity markets, which tends to benefit the safe-haven Japanese yen.

Bulls failed to gain any respite after the Bank of Japan (BoJ) lowered its real GDP growth and consumer inflation estimates for the current fiscal. In the fresh quarterly report, the BoJ predicted growth of 3.4% for the year to March 2022, down from its previous estimate of 3.8%, and also revised down its inflation forecast to 0% from 0.6% previous.

This reinforced market expectations that the BoJ will maintain its ultra-loose monetary policy and lag other major central banks in rolling back the crisis-era stimulus. The Japanese central bank, however, sounded more positive about the longer-term outlook and revised up its growth forecast for the fiscal year to March 2023 to 2.9% from the previous estimate of 2.7%.

Nevertheless, the USD/JPY pair reacted little to the BoJ announcement and Governor Haruhiko Kuroda’s comments at the post-meeting press conference, showing readiness to ease policy further if needed. That said, a modest uptick in the US Treasury bond yields helped limit any deeper losses amid a subdued USD price action and ahead of Thursday's key event/data risks.

The European Central Bank is scheduled to announce its monetary policy decision later during the mid-European session. Apart from this, the Advance US Q3 GDP report should infuse some volatility in the markets and provide a fresh impetus to the USD/JPY pair. Traders might further take cues from the US bond yields and the broader market risk sentiment.

Technical levels to watch