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The last week has seen a major advance for the shekel, which broke out of its previous trading range to attack seven-month highs. The current level of 4.54 shekels to the dollar has not been seen since late September of last year. Since that time, it has traded as low as 4.75 shekels per dollar.
Technical indicators suggest that another crucial week of trading lies ahead for the currency.
The 4.52 level looks to be the point where the latest rally could run into difficulty, as the chart signals resistance at this mark. Resistance refers to the price level where, historically, selling has proven to be strong enough to prevent a further advance in price. Were the shekel to push through this barrier, however, it would open up the possibility of a rally to as high as 4.47.
The only negative sign evident in the chart is that the 4.52 mark looks to be quite a tough level to crack. The almost straight line of the shekel's recent advance, coupled with nervousness as the price nears 4.52, could bring out sellers in the short-term, who reckon that the recent surge is due a reversal. If this happens, the price will likely retrace to the 4.55 level, where there is firm support for the currency.
Technical analysis is the study of trading based on previous performance, focusing exclusively on price movements rather than the fundamentals of the index/currency involved.
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