A two-week ceasefire agreement between the United States and Iran, as announced by US President Donald Trump, has influenced currency markets, particularly JPY crosses, during Asian trading hours on Wednesday. Trump stated that the ceasefire is conditional on Iran reopening the Strait of Hormuz, with safe passage coordinated by Iran’s Armed Forces and technical limitations considered, according to Iranian Foreign Minister Seyed Abbas Araghchi [1][2]. A White House official also indicated that Israel has agreed to the ceasefire [2]. Talks to finalize the agreement are scheduled to begin in Islamabad, Pakistan, on Friday, with the possibility of extension if both sides agree [2].
The AUD/JPY cross gained momentum, trading around 111.80, as improved risk sentiment supported the Australian Dollar against the Japanese Yen. The easing of Middle East tensions undermined the safe-haven appeal of the JPY, providing a tailwind for AUD/JPY in the near term [1]. Technical analysis shows AUD/JPY trading well above its 100-day EMA (around 107.50), with the RSI rebounding toward the high-50s and price action holding in the upper half of the Bollinger Band envelope, indicating sustained upside momentum. Immediate resistance is noted at 112.61 (March 19 high), with further resistance at 113.15, while support levels are at 111.00, 110.00, and 109.00 [1].
Conversely, EUR/JPY traded near 185.10 after paring earlier gains, as the JPY strengthened on falling oil prices following the ceasefire announcement. Japan, as a major net energy importer, benefits from lower oil costs, which ease imported inflation pressures and support the case for a Bank of Japan rate hike by reducing recession risks associated with tighter policy [2]. However, ongoing military actions by Iran in the Middle East, including missile launches toward Israel and a missile attack intercepted by Qatar, continue to inject uncertainty into the market [2].
Japanese authorities have signaled vigilance, with Japan's top currency diplomat Atsushi Mimura stating last week that officials may need to take 'decisive' steps if speculative moves persist in the currency market, potentially capping JPY downside [1].
CONCLUSION
The US-Iran ceasefire has led to divergent moves in JPY crosses, with AUD/JPY gaining on improved risk sentiment and EUR/JPY trimming gains as JPY strengthens on lower oil prices. While easing Middle East tensions have reduced safe-haven demand for the Yen, ongoing regional instability and potential Japanese intervention remain key factors for market participants.