Tel Aviv (TA 35), USD/ILS forecast as the Israel-Palestine war continues

The Tel Aviv (TA 35) index plunged hard as investors reacted to the ongoing Israel-Hamas war. The index slipped by more than 6.35% on Sunday and landed to a low of ILS 1,690, the lowest level since February 25th. It is hovering at the lowest level since August 2021. It has also crashed by more than 11% from the highest level this year.

It was a sea of red in the Tel Aviv stock exchange on Sunday as investors reflected on the ongoing war in Israel. At the same time, the USD/ILS exchange rate surged to a high of 3.98, the highest level since 2015. It has jumped by more than 27% from the lowest level in 2022. 

The Israeli shekel and stocks plunged as investors prepared for a prolonged war in Israel. A look at its key components shows that all companies were in the red. Delek Group, a conglomerate in the petroleum industry, crashed by more than 13%. Analysts believe that the firm will see disruption if the war continues. 

The other top laggards in the index were Newmed Energy, Enlight,  and Shikun & Binui, three large companies in the country. All these shares plunged by more than 12% on Sunday. Other top laggards in the index were Electra, Melistron, and Azrieli Group. 

Only one company, Teva, was in the green on Sunday. Teva, a leading pharmaceutical company, will be less affected by this crisis because of its global operations. It makes most of its money in the United States. In 2022, it made $7.4 billion in the US followed by $4.3 billion in Europe and $1.9 billion in the international market.

The performance of the TA 35 index and the USD/ILS pair will depend on how long the war continues. It will also react to where the war will be concentrated in and the potental inflows by investors seeking to buy the dip.

The weekly chart shows that the Tel Aviv 35 index has been under pressure in the past few days. It crashed to the key support at ILS 1,690 on Sunday. This was an important support level since it was also the lowest swing on February 26th.

The index has crashed below the 50-week and 25-week exponential moving averages (EMA). It has also moved to the 38.2% Fibonacci Retracement level while the Relative Strength Index (RSI) has drifted downwards. Therefore, more downside will be confirmed if the price moves below the key support at ILS 1,600. 

On the weekly chart, we see that the USD/ILS exchange rate has been in a strong bullish trend as the DXY index continued. The pair’s rally also happened because of the large-scale protests in Israel, which I wrote on here.

It has retested the important resistance point on March 2020. The bullish trend is above the 50-week and 25-week moving averages while the RSI is approaching the overbought level.

Therefore, the outlook for the USD/ILS is bullish in the coming days as buyers target the key resistance at 4.0. A drop below the key support at 3.80 will invalidate the bullish view.

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