USD/JPY: Buyers stay on sidelines despite reports BOJ to downgrade inflation forecasts

USD/JPY's recovery from Wednesday's 0.85% decline has been anemic even though reports are doing the rounds that the Bank of Japan (BOJ)  expected to cut its growth and price forecasts for the current fiscal year at this week's monetary policy meeting. 

"It's [growth] somewhat weaker than three months ago," three sources familiar with the matter told Reuters last week. 

However, prospects of downward revision of the growth and inflation forecasts have failed to entice yen sellers. The USD/JPY is currently trading largely unchanged on the day near 104.68. So far, the recovery from Wednesday's low of 104.34 has been restricted near 104.90. 

While the Japanese central bank is expected to downgrade inflation expectations, it is unlikely to announce additional easing. That explains the muted reaction from yen sellers. 

Besides, surging coronavirus cases in Europe and the US are threatening to derail global economic recovery and currently weighing over the US stock futures and helping the anti-risk currencies like the yen avoid losses. 

Should the risk aversion worsen, USD/JPY may suffer a deeper decline toward support at 104.00 (Sept. 21 low). 

Technical levels