With or without a ceasefire, the Israeli shekel remains strong. The currency that rallied to a three-year high against the US dollar on 15 July weakened slightly on Tuesday but came back to the uptrend on Wednesday.
The way the so-called Iron Dome is protecting Israel from the missiles of Hamas or others, prospects of increased gas sales are boosting the shekel, ignoring a number of rate cuts by the central bank.
The USD/ILS slipped to 3.4098 from 3.4146 at Tuesday's close. The pair had touched a low of 3.4015 on 15 July that made the shekel's strongest level since August 2011.
The shekel has always ignored the theory of interest rate differential. It had weakened 8.4% in the nine months from October 2011, when Bank Israel last hiked its main interest rate. During that period, the rate was slashed to 2.25%.
The rate cuts continued, to as low as 0.75%, but the shekel, from the July 2012 three-year low of 4.0984, has rallied more than 20% to the three-year high touched on 15 July.
Reports by Bloomberg show that hopes of improved peace in the region after the proposed ceasefire with Hamas strengthened the Israeli currency.
Earlier this year, the USD/ILS broke below the downside barrier of an uptrend dating back to June 2008, and the pair is now eyeing the 3.3800-3.3500 support ahead of 3.2800 and 3.1800, which will be a strong support.
On the higher side, the pair has its first level of resistance near the 3.4800-3.5100 region, a break of which will weaken the downtrend since July 2102 and expose 3.7300, near the 50% Fibonacci retracement of the May 2011 to July 2012 uptrend.
A break of that will confirm the upward reversal of the trend and open the doors to levels like 3.8200, the 38.2% level, and then 3.9300, the 23.6% retracement, ahead of a retest of the 2012 peak.