Forex Market Update: Aussie & Kiwi Recover as Geopolitical Fears Ease, Yen Gains on Safe-Haven Demand

The currency markets kicked off the week with heightened volatility, driven by renewed Middle East tensions and shifting expectations around U.S. interest rates. Despite an initial risk-off tone, both the Australian Dollar (AUD) and New Zealand Dollar (NZD) rebounded strongly, while the Japanese Yen (JPY) attracted buyers seeking safety.

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AUD/USD Climbs as Tensions Fade and Fed Signals Dovish Pivot

The AUD/USD pair initially slipped in early Monday trade amid news of U.S. airstrikes on Iranian nuclear facilities. However, markets quickly stabilized after Iran’s retaliatory missile attacks on U.S. bases in Qatar resulted in no casualties, calming fears of immediate escalation.

Dovish comments from Federal Reserve Governor Michelle Bowman further weakened the U.S. Dollar. She noted that inflation is trending lower and hinted at potential rate cuts as early as July. This shift in sentiment supported a rebound in the Aussie, pushing AUD/USD back above its 200-day simple moving average.

Australia’s PMI data—while showing modest improvement—was largely ignored by traders as focus remained on Powell’s upcoming remarks and broader geopolitical developments.

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Yen Surges on Safety Flows as USD/JPY Retreats

The Japanese Yen staged a sharp reversal after hitting a five-week low. Following Iran’s retaliation, global investors sought refuge in traditional safe-haven assets, including the Yen.

USD/JPY briefly touched 148.03 before retreating sharply to 146.20 as the U.S. Dollar Index (DXY) fell below the 99.00 level. Despite mixed U.S. PMI data, dovish Federal Reserve rhetoric drove renewed speculation of a policy pivot.

Bowman’s comments reinforced market bets on a July rate cut, contributing to downside pressure on USD/JPY.

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Technical Outlook

🔹 AUD/USD – Bullish Breakout Emerging
The pair found strong support at the 0.6400 mark and now trades within an ascending broadening wedge pattern—indicating growing bullish momentum. With commodities strengthening and USD pressure increasing, a potential breakout toward the 0.6520–0.6600 zone is on the table.

🔹 NZD/USD – Bullish Consolidation in Progress
On the 4-hour chart, NZD/USD is forming a bullish structure between 0.5850 and 0.6020. A sustained break above the 0.6100 level could fuel a strong upside run. As long as the price remains above 0.5850, the bullish outlook remains intact.

🔹 USD/JPY – Capped at 148, Downside Risk Ahead
USD/JPY is trading within a descending broadening wedge. After failing to break the 148.30 resistance, the pair pulled back toward 146. A break below the key 142 support could trigger a deeper correction, especially if safe-haven demand strengthens.

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Conclusion:
The forex market remains on edge as traders weigh global geopolitical risks against evolving Fed policy signals. While the Australian and New Zealand Dollars recover lost ground, the Japanese Yen appears poised for further gains if risk sentiment deteriorates further.