The US dollar has been a little bit choppy on Friday, as traders continue to focus on war headlines.
USD/ILS
The US dollar has been a little bit choppy against the Israeli shekel on Friday as we are hanging around a couple of major technical areas. The first thing that keeps me focusing on this market is that we are dancing around the 50-day EMA, which of course is a major technical analysis indicator that a lot of people watch very closely for dynamic support and resistance.
All things being equal, this is a market that continues to see the 3.17 level as resistance and the 3.05 level underneath as support. The question now is whether or not this market is in the midst of bottoming.
The fact that the Israeli shekel has been relatively stable over the last couple of months is quite remarkable considering everything that is going on in that part of the world and therefore I find this a very fascinating currency pair to watch.
Geopolitical and Economic Outlook
If the geopolitical tensions escalate or the US economy continues to show surprising strength, it is possible that the US dollar starts to rally, but we need to clear the 3.17 level first. That could open up a move towards the 3.25 level before it is all said and done. To the downside, we could see a drop to the 3.05 level, having the shekel gaining strength if we get some type of ceasefire or de-escalation materializing.
It is expected to see some gains in peace by the end of late April, but we will have to see how that plays out. The Bank of Israel's baseline scenario at the moment assumes that active fighting in Lebanon will conclude by the end of April and therefore, if this timeline holds, we may see a little bit of the war premium fade, allowing the shekel to strengthen.
Inflation is expected to rise to 2.2% in 2026, driven by higher energy prices and constraints. GDP growth forecasts have been slashed to 3.8% for 2026 by the Bank of Israel from originally expected 5.2%, reflecting the economic toll of the ongoing conflict. As things stand right now, I suspect we may be seeing a little bit of repricing as it looks like a rounded bottom. But again, we need to get above 3.17 for it to be a clean buying signal.