• USD/JPY turns lower for the second straight day following a modest Asian session uptick.
• A shift in Japan’s intervention tactics underpins the JPY and weighs on the currency pair.
• Receding Fed hike bets offset geopolitical risks and keep the USD bulls on the defensive.

The USD/JPY pair attracts fresh sellers following a modest Asian session uptick to the 161.50 region and turns lower for the second straight day on Friday. Spot prices currently trade around the 161.00 mark and seem poised to extend the corrective fall from the highest level since 1986, touched on Wednesday.

As investors digest June's softer US jobs data, persistent geopolitical uncertainties helped the safe-haven US Dollar (USD) move away from its lowest level since June 18, set on Thursday, and turned out to be a key factor supporting the USD/JPY pair. The New York Times reported that US officials feared Israel may be hatching a plan to kill two of Iran’s senior negotiators during indirect peace talks. US officials believed that any assassination attempt could derail negotiations and trigger renewed fighting. Adding to this, Iran’s military headquarters warned that any US interference in the Strait of Hormuz will be met with a “decisive and swift response.”

The USD bulls, however, seem hesitant amid receding US Federal Reserve (Fed) rate hike bets. The closely-watched US Nonfarm Payrolls (NFP) showed that the economy added 57K new jobs in June, far below the 110K expected. Adding to this, the previous month's reading was revised down from 172K to 129K, which pointed to softening labor conditions and offset a downtick in the Unemployment Rate to 4.2% in June. The crucial data shifted market expectations from one to two Fed rate increases in 2026 to between zero and one hike, which holds back the USD bulls from placing aggressive bets and keeps a lid on any meaningful appreciation for the USD/JPY pair.

Meanwhile, the Japanese Yen (JPY) might continue to draw support from a significant shift in Japan's intervention tactics. In fact, two sources familiar with the matter said on Thursday that Japanese officials are abandoning their habit of telegraphing intervention risks. Instead, they are shifting to a more targeted campaign to squeeze speculators and raise the cost of betting against the ​battered Japanese Yen (JPY). This injects a new element of uncertainty, which might continue to prompt a further adjustment in the JPY speculative positions and validates the near-term negative outlook for the USD/JPY pair amid thin liquidity on the back of a US holiday.