Analysis: Shekel rally likely to continue

By SETH FREEDMAN
May 9, 2006 05:15
1 minute read.

 
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The Shekel has rallied strongly to NIS 4.44 against the dollar since, in line with this column's April 27 predictions. Despite the substantial gains already logged by the currency, even more gains may be in store, with technical analysts believing there could be another sharp increase in the mid-term to 4.40, or even higher, if the current rate of ascent continues. Towards the middle of last week, there was a flurry of buying of the dollar, as it appeared to many that the US currency was oversold in recent weeks. That prompted a brief rise in the beleaguered currency's value, however, by the end of the week, the dollar was in decline once again. This suggested that its mini-rally was no more than a "dead cat bounce" - a term used to describe a pattern wherein a sharp rise in the price of a stock follows a spectacular fall, with the connotation that the rise does not indicate improving circumstances. On the premise that "even a dead cat will bounce if it is dropped from high enough," it can be surmised that the dollar is in unarrestable decline at present, and any respite is only likely to last temporarily, before further falls are seen - meaning more gains for the shekel. Therefore, if the current trend continues and the dollar continues to weaken, the Shekel looks set to carry on the phenomenal rate of increase of the last month, and - as long as it holds above 4.47 (where there is strong support) - further gains look imminent. 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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