The Bank of Israel kept its policy interest rate steady at 4.5% for the seventh consecutive meeting. This move matches expectations and reflects ongoing concerns about inflation. This decision also affected the Israeli Shekel. The currency gained against the U.S. dollar and broke below the 3.701 critical resistance.
As of this writing, USD/ILS trades at approximately 3.625, testing the August 30 low as support.
Israel’s VAT Hike Expected to Push Inflation Up in 2025
In October, annual inflation was 3.5%, the same as in September, and still above the central bank’s target range. Due to increased value-added tax (VAT), inflation is expected to rise in early 2025. However, it should return toward the target range’s upper limit in the latter half of the year.
Geopolitical uncertainties hinder economic recovery and delay a return to pre-conflict activity levels. The economy grew by 3.8% year over year in the third quarter. Despite this growth, a negative gap remains because of supply constraints.
Early indicators for the fourth quarter show mixed results with slight weakening. The labor market stays relatively tight, even though there’s been some softening.
Since the last rate decision, the Israeli Shekel has strengthened. It gained 0.9% against the U.S. dollar and 6.4% against the euro.
USDILS Forecast – Prices Hit Oversold Levels
Recent selling pressure resulted in the RSI 14 and Stochastic stepping into oversold territory, depicting 18 and 15, respectively. The development in the momentum indicators suggests that USD/ILS is oversold, and a reversal or consolidation phase could be on the horizon.
The immediate resistance is at the 22.6% Fibonacci (3.65). From a technical perspective, the USD/ILS trend outlook remains bearish as long as the prices are below this level. However, we expect a bounce in the prices due to oversold signals received from RSI and Stochastic.
USD/ILS Nears Key 3.65 Level — What to Expect
That said, a new bullish wave could begin if bulls pull the prices above the 3.65 resistance. In this scenario, USD/ILS could rise toward testing the 3.70 mark as resistance. This level provides a decent and low-risk price to join the bear market.
Therefore, traders and investors should monitor the 3.70 mark closely for bearish signals, such as candlestick patterns.
- Good reads: EURUSD Near 50-SMA as Bearish Trend Holds Strong
The Bearish Scenario
Conversely, the downtrend could resume if bears push USD/ILS below 3.625. In this scenario, the next bearish target could be July’s low at 3.58.
- Support: 3.62 / 3.60 / 3.58
- Resistance: 3.65 / 3.68 / 3.70