Israeli shekel (USD/ILS) analysis after Operation Shield and Arrow

The USD/ILS exchange rate remained in a tight range this week as the market reacted to the latest US inflation data and Operation Shield and Arrow. The pair was trading at 3.63, which was a few points below this week’s high of 3.6747.

Operation Shield and Arrow

There were three main catalysts for the USD to Israeli shekel this week. First, the US published encouraging consumer inflation data on Wednesday. These numbers revealed that the country’s inflation was cooling as the headline CPI moved to 4.9%. Core inflation dropped to 5.4%. 

There is a possibility that prices will continue falling since energy costs have continued falling in the past few days. The price of Brent and WTI have moved from over $90 in January to below $75 recently. Therefore, with risks in the banking and commercial real estate sector, there is a likelihood that the Fed will take a strategic pause going forward.

The other important forex news was on America’s debt ceiling. Joe Biden and the house speaker met on Wednesday to deliberate about the ceiling. Unfortunately, there was no outcome since they decided to continue deliberating. A meeting set for Friday was postponed. 

Analysts caution that failing to raise the debt ceiling will have major implications to the American and world economy. It will lead to a higher unemployment rate and a sharp decline in key assets like stocks and commodities.

Finally, the USD/ILS exchange rate reacted to the Operation Shield and Arrow. This week, Israel bombed the Gaza Strip, killing senior officials of the Palestinian Islamic Jihad. Hamas and Islamic Jihad vowed to retaliate, which will prolong the conflict in the country. In a statement, Shalom Lipner told the Atlantic Council:

“The fact of a PIJ response is a foregone conclusion. What remains uncertain, however, is the future trajectory of this particular showdown.”

USD/ILS technical analysis

USD/ILS chart by TradingView

The USD to Israeli shekel has moved sideways in the past few days. This price was trading at 3.6400, which was a few points below this month’s high of 3.6750. It has also moved slightly below the 25-period moving average. The USD/ILS has formed what looks like a double-top pattern. 

Therefore the outlook of the pair is bearish, with the next key target to watch being at 3.6050, the lowest point on May 2.