The powerful “peace dividend” trade that swept through global markets earlier this week is beginning to lose momentum, and USD/JPY is quickly emerging as one of the clearest expressions of that shift. As optimism over a rapid US-Iran agreement fades slightly and the pair resumes its climb toward the politically sensitive 160 zone, markets may soon test Tokyo’s tolerance for Yen weakness before they fully test whether Tehran is actually ready to sign a final deal.
Fresh reports of U.S. military strikes on Iranian-linked targets near Bandar Abbas, combined with renewed caution from U.S. Secretary of State Marco Rubio, forced traders to reassess expectations for an imminent US-Iran agreement and reopening of the Strait of Hormuz.
The latest strikes, described by U.S. Central Command as “self-defense” actions against boats allegedly attempting to lay mines and active missile sites, served as a reminder that the seven-week ceasefire remains fragile. Rubio also cooled expectations by warning that negotiations could still “take a few days” to finalize. Those comments effectively interrupted the aggressive market repricing that had previously pushed oil sharply lower, weakened Dollar, and fueled a broad risk rally across global equities.
As optimism receded, Brent crude recovered modestly back above $96 level while Dollar stabilized broadly in currency markets. Yen underperformed again with the geopolitical headlines. The rebound in USD/JPY reflects the market’s realization that the disinflation trade linked to a rapid Hormuz reopening may have moved too quickly.
Technically, USD/JPY now appears capable of breaking above the 159.33 temporary high to extend the rebound from 155.01. However, the move is still viewed as the second leg of the broader corrective pattern from 160.71. Strong resistance is expected near that intervention-sensitive zone, particularly with 160 still widely viewed as Tokyo’s “line in the sand” for potential intervention.
Meanwhile, break of 158.57 minor support will bring deeper fall back to 55 D EMA (now at 158.21). Sustained break there would argue that the third leg has already started and target 155.01 support next.
