Australian Dollar Soars as Iran Ceasefire Fuels Risk-On Rally

The US and Iran agreed to a temporary, conditional ceasefire on Tuesday, prompting the Australian dollar to lead the risk-on rally for FX on what is now dubbed Trumps’ Taco Tuesday.

Appetite for risk is on a tear following President Trump’s decision to delay the bombing of Iran by two weeks, allowing more time for talks. Although Iran’s public endorsement of a ceasefire is arguably the bigger headline, given they had consistently pushed back on Trump’s claims that talks were even happening — let alone progressing well.

View related analysis:

When you factor in that the two-week delay is longer than the original 10-day window set for the initial attack, it seems plausible that the worst of the conflict may now be behind us. It’s now down to negotiators to reopen the Strait of Hormuz, though at what cost remains to be seen.

Naturally, we can expect President Trump to claim victory and regime change, while overlooking the fact that the same regime remains in power. Iran has also demonstrated its ability to hold global oil markets hostage via the Strait of Hormuz. The true knock-on effects of this conflict may therefore take time to play out, as it seems unlikely Iran will loosen its grip on the Strait anytime soon.

Markets can worry about the complexities later — for now, they’ve been given the green light to rally.

Australian Dollar Rallies as Iran Ceasefire Sparks Risk Appetite

The Australian dollar is the clear leader for FX amid today’s risk-on rally

AUD/USD rose as much as 1.7% after the Iran headlines dropped, and currently on track for its most bullish day in three months
AUD/CAD tapped 0.98 and reached a 5-year, 2-month high
AUD/NZD has risen to a 3-year high ahead of today’s RBNZ decision
AUD/JPY is up for a third day with bulls probing 1.12, as safe-haven flows move away from safe haven
AUD/CHF is currently up 1.3% on the week, potentially marking its best week since December
AUD/EUR is up for a sixth day – its best such run since June – amid its best day in 20
AUD/GBP up for a fifth day and at a 13-day high

Source: LSEG

AUD/USD Technical Analysis: Australian Dollar vs US Dollar

While I had flagged the potential for a pullback on AUD/USD in recent weeks due to stretched bullish exposure in the Australian dollar futures market, it is possible we may have already seen the end of that correction.

Assuming the Strait of Hormuz is reopened within two weeks, it would allow traders to refocus on domestic data — which tends to support the case for further RBA hikes.

AUD/USD Futures Positioning | COT Report

Gross longs reached a 10-year high among large speculators last week
Net-long exposure remained near record highs
Gross short exposure fell to its lowest level since November 2024 among large speculators, and to a 10-month low among asset managers

The fact that short bets never rose during this retracement suggested the pullback could be limited — unless the situation in the Middle East materially deteriorated.

Source: LSEG

AUD/USD Regains Bullish Momentum Above 70c

Zooming in, we can see that the AUD/USD weekly chart (left) is on track to form a three-week bullish pattern known as a morning star reversal. Note that last week’s doji low respected the 20-week EMA, and prices are now back within the 8-week range where they were contained between the 2023 and 2024 highs. Implied volatility has also fallen by around 50%, although it remains elevated compared to the start of the year.

Risk Reversals Turn Less Bearish for AUD/USD

The daily chart shows that risk reversals bottomed around one month ago. While they remain negative — indicating options traders still favour downside protection over bullish bets — the fact that put demand is diminishing can be seen as a relatively bullish signal.

Bullish momentum has also picked up on the daily chart, with AUD/USD comfortably back above 70c. Unless we see the ceasefire unravel, my bias is for bulls to buy dips in anticipation of a breakout above the 2023 high. This scenario likely requires the ceasefire to hold and the Strait of Hormuz to reopen, regardless of who ultimately controls it once talks are finalised.

Source: LSEG

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Products and services available depend on your location and the entity holding your account. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

Contracts for Difference (CFDs) are not available to US residents.

FOREX.com is a trading name of GAIN Capital - FOREX.com Canada Limited, 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA is a member of the Canadian Investment Regulatory Organization and Member of the Canadian Investor Protection Fund. GAIN Capital – FOREX.com Canada Limited is a wholly-owned subsidiary of StoneX Group Inc.

Complaints are taken very seriously at FOREX.com. You can view our complaints procedure here.

Know your advisor