The USD/ILS pair tried to rally during the session on Wednesday, but as you can see failed to continue going higher, just as we had done during the Tuesday session. In fact, the market formed a beautiful shooting star for the second day in a row, and this of course has my attention. The main reason is that the US dollar has lost value against the Israeli shekel for some time. We are most certainly in a downtrend, and this recent spike has been completely against the grain.
I believe that part of this is based upon the problems with the Gaza Strip, but ultimately I think that it’s only a matter of time before money floods back into Israel. After all, it is a higher-yielding economy, and even though the Israeli central bank recently has cut interest rates, there is still the possibility of appreciation buying the Shekel over the Dollar.
Perfect spot for the sellers to come back in.
On the weekly chart, this is an area that has been resistive in the past, and as a result it’s very likely that this market will see sellers enter. If you have the ability to buy the Israeli shekel, I believe that a break down below current levels will more than likely cause a pretty significant amount of bearish pressure. I think that this pair could very easily go back down to the 3.40 level if peace breaks out. As odd as that sounds, Hamas and Israel have agreed to a cease-fire, so it is possible we may get some stability again.
The US dollar of course is favored against most currencies, binds even as that has happened, it has been a little bit different against the Israeli shekel. I’m watching this market very carefully, as I believe there is a nice selling opportunity waiting to happen. On the other hand, if we break above the 3.6000 level, at that point time I would have to say that the trend has changed, and the US dollar should continue to gain.
