The shekel has weakened against the US dollar and strengthened against the euro at the start of this week's trading on the foreign exchange market. The shekel-dollar rate is currently 0.21% above Friday's representative rate, at NIS 3.5755/$, while the shekel-euro rate is down 0.18%, at NIS 4.6971/€.
FXCM Israel says in its market review this morning, "The shekel-dollar exchange rate rose by 4.3% in August, and signs are multiplying, both technical and fundamental, indicating that this is the start of a significant turnaround in the exchange rate trend, which has been almost uninterruptedly downwards in the past few years. The turnaround is based not only on the weakness of the shekel, but also on the strength of the dollar.
"After the sharp upturn at the beginning of last week that followed the surprise interest rate cut by the Bank of Israel, for most of the week the shekel-dollar rate marked time slightly above NIS 3.56/$, which could signal a downward correction in the next few days. If this happens, the correction will help us to estimate the strength of the current turnaround. The most important support level is at NIS 3.55/$. A fall below this level could encourage the short players again and extend the correction. On the other hand, a rise above NIS 3.58/$ could give the signal for the next jump.
"Locally, investors will focus this week on the budget discussions, against the background of the Governor of the Bank of Israel's call to avoid a rise in the fiscal deficit. The shekel is currently very sensitive to any economic or political development. Rapid passage of the budget, which will also confirm the stability of the coalition, will help to stabilize the shekel. But if the passage of the budget encounters difficulties and exposes cracks in the government, this is liable to have an adverse effect on the shekel.
"The cease-fire with Hamas helped to moderate the decline of the shekel last week, but it should be remembered that this is only a truce. If the sides fail to reach a long-term understanding and the fighting resumes, this is likely to weigh doubly on the shekel. Therefore every development in the talks between Israel and Hamas will affect the local foreign exchange market.
"Although most attention is now on the local factors dictating shekel-dollar trading, the global trend in the dollar must also be considered. The dollar continues to strengthen, with the global index reaching its highest level last week since September 2013. The fact that the dollar is strengthening despite the rise in stock prices on Wall Street brings home the fundamental nature of the change in the dollar trend on world markets.
"The main event in the US economic calendar this week is the employment report that will be released on Friday and is expected to show about 200,000 additional jobs in August. The unemployment rate is expected to decline from 6.2% to 6.1%. Continued improvement in the labor market strengthens the assessments that the Federal Reserve will raise interest rates earlier than had been expected, and this is boosting the dollar globally, and against the shekel as well."
Published by Globes [online], Israel business news - www.globes-online.com - on September 1, 2014
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