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  • USD/JPY witnessed some selling for the second straight session on Thursday.
  • The downtick was exclusively sponsored by some follow-through USD selling.
  • The upbeat market mood, dovish BoJ might help limit any further downside.

The USD/JPY pair extended its steady intraday decline and dropped to fresh two-week lows, around the 103.30 region in the last hour, albeit quickly recovered few pips thereafter.

The pair failed to capitalize on its early uptick, instead met with some fresh supply near the 103.65 area and turned lower for the second consecutive session on Thursday. The US dollar witnessed some follow-through selling, which, in turn, was seen as one of the key factors exerting pressure on the USD/JPY pair.

Bearish traders further took cues from a weaker tone surrounding the US Treasury bond yields and seemed rather unaffected by dovish Bank of Japan (BoJ) economic assessment. In fact, the Japanese central bank revised its GDP target for the fiscal year 2020 to -5.6% from the previous projection of -5.5%.

That said, the prevalent risk-on environment – as depicted by the ongoing rally in the equity markets – undermined the Japanese yen and helped limit deeper losses for the USD/JPY pair. The global risk sentiment remained supported by hopes that more US stimulus package under Joe Biden’s presidency will boost economic growth.

Apart from this, comments by the BoJ Governor, Haruhiko Kuroda further weighed on the JPY and extended some support to the USD/JPY pair. Speaking at the post-meeting press conference, Kuroda reiterated that the BoJ is watching the impact of the coronavirus closely and will not hesitate to ease further if needed.

Despite the supporting factors, the USD/JPY pair, so far, has struggled to register any meaningful recovery. The lack of any buying interest suggests that the near-term bearish bias might still be far from being over. Hence, any bounce might still be seen as a selling opportunity, warranting caution for bullish traders.

Technical levels to watch