Monday's decision by the Bank of Israel to raise interest rates to 5.5% surprised few experts and saw the shekel rally against the dollar, though analysts are split over whether the hike was made for the right reasons. Many factors went into the decision, including the desire to keep interest rates equivalent to those in the US - which are expected to be raised to 5.5% at the Federal Reserve's August meeting. The central bank also cited current hostilities in the North, since the war increased the risk that the shekel would depreciate and thus spark inflation. When the violence began, investors started selling their shekel assets, preferring "safer" currencies as the conflict raged on - thus a rise in interest rates was seen as potentially tempting buyers of the currency to emerge, since they would be getting a higher rate of return on their investments. It is precisely this knee-jerk reaction to the war that led Ronny Helmann of Helmann-Aldoby to read the rate rise "as a signal to [sell the shekel and] buy the dollarâ€¦ as this is not the usual situation [that should precede a rise in interest rates]." He believes conditions were not right for the hike at this time, and said the fact that the Bank chose to go ahead with it suggests that the BOI is more concerned with the stability of the shekel than the state of the economy. From a technical viewpoint, however, the shekel appears to be fairly strong on the charts. The outbreak of fighting two weeks ago saw the shekel collapse from 4.38 per dollar to 4.56, but it quickly rallied again and currently stands at about 4.43. It is now in the same position as it was in the middle of May, when the currency had been enjoying a five-week long rally. "The shekel could remain range-bound while theâ€¦ geopolitical situation remains unclear," said London-based trader Oli Greenspan at Hamilton Court Capital. "However, the trend is unmistakably up and we would stay long [the shekel] unless it broke above 4.50." In this column on July 4, it was suggested that the shekel's advance would taper off around the 4.36 mark - the subsequent violence started the decline on July 12 when it stood at 4.38. Assuming that the rate rise has, in the short-term, countered investors' nervousness at holding shekels, from a technical point of view the currency would appear to be headed back to the 4.36 mark again in the longer term. 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.