In the extensive article, we learn about two types of reasons for the miraculous strengthening of the shekel against the American currency: the first general reason is the sale of dollars, and the purchase of shekels, by various “real” economic factors. Here is a description of the situation: “In recent months, the inflows of foreign currency entering the Israeli economy have intensified, against the background of the increase in current account surpluses, direct investments, high-volume foreign exchange sales by institutional investors against their capital gains abroad, and increased foreign investment In Israeli government bonds, also as a result of Israel’s inclusion in the global bond index WGBI“.
And the second reason, mentioned below, speaks to the effect of the weakening of the dollar in the world as a strengthening factor of the negative trend in the American currency in our places. For the collection of things mentioned in the first part, it is stated as follows: The attraction that the State of Israel evokes in foreign investors, and the desire of investors to realize profits, are positive and inevitable things. Both the increase in the current account deficit and the state’s affiliation to the global bond index are good factors in principle, stemming from the times of the corona, and Israel’s integration into the global capital market.
But, let’s be honest: these factors were not the dominant thing in the intensity of the dollar’s decline in us.
The second factor, namely the weakness of the dollar in the world, and its impact on the domestic foreign exchange market, is the main cause of the “problem.” I put the word problem in quotes because it is not essentially like that, but only as a result of the strengthening of our currency on the sector The exporting business.But, wait, what does it mean “the impact of the weakness of the dollar in the world”? How does this happen, exactly? You guessed it: by trading operations of speculators in our foreign exchange market. Both in the very short term, and in the slightly longer term, when there is a negative “core position” on the dollar, and a positive one on the shekel, in a huge size.
The official description of things is trying to tell us that because of our relatively good economy, and our macro data, which is improved relative to countries like ours inOECDThe shekel must be strong. If this were true at an absolute level, we would see periods when the shekel would be significantly stronger, even when the dollar strengthened in the world. Thus, a huge gap would open up between the shekel and currencies such as the euro, the wine, and more, and especially against other exotic currencies of smaller countries.
In the general sense of the big trends this is not the case. Since the 1980s, and the stabilization program of the price-conscious, which has stifled the whole inflationary issue to a normal global level, the long-term trends of the dollar here and in the world, tend in favor of the shekel but in a relatively moderate way. And this is a sign that the local fundamentalist is playing a role but certainly relatively junior, when talking about momentum and strategic price movements in a dollar-shekel pair.
Here are two weekly charts: The dollar-shekel (USDILS) And the dollar index:
Weekly graph of the dollar-shekel
Weekly graph of the dollar index
Both graphs start from the end of April 2018, and show what has been done in both financial assets, to this day. From the end of 2018, until the events of the corona (March 2020), it is certainly possible to notice the strengthening of the shekel along with a small strengthening of the dollar in the world. And that certainly indicates an absolutely stronger shekel. Little but definitely upholds it. But, since the corona, the dramatic rise in the value of the dollar, and its no less violent decline, have been remarkably trending and relatively similar in intensity. how does it happen? Very simple: in the forex market, taking a position in the negative direction is as easy as in the positive direction, with the built-in leverage of that market. You do not need a stock loan to make a short, or any other complicated operation.
Therefore, the ease of “imitation” of the global trend, by very large players in the market (institutional traders in Israel and around the world) is carried out with extreme ease. Are they thinking about Israeli exports? of course not. They assume that the momentum will build up stairs of increasing negation, to the point where the last buyer will be: the Bank of Israel. And the big question: at what price should we stop the process? Every January we saw the optimal situation built before our eyes, for those speculators. A global back wind, along with a tireless buyer, picks up any supply as the price continues to fall (!). In short, the central bank does what every trader begins to learn in his second lesson of the course: a platform against the trend is forbidden! And only the problem remains to determine the stopping point of the process.
These days we are witnessing the construction of an environment of temporary, at least short-term stopping of the same mechanism.
Why do I think so? Ostensibly, based on the current situation, the Bank of Israel’s statement should have been a godsend for those activists: there is another 30 billion on the receiving end of the shorts they want to make against the dollar. But, and this is the critical point: we are beginning to see the first sign of a change in the global dollar. A sign of minimal charge.
Thus, we have before us an amazing combination of three influencing factors to cause the same temporary cessation of the strengthening of the shekel:
· The negative backlash of the dollar in the world is starting to weaken,
· Violent government cash comes to fight against anyone who does not understand when to realize profits on time,
· Reaching historic extremes that require “technical” relief urgently.
In the dollar-index graph I marked the first sign of the positive change in a green rectangle, and in the dollar-shekel graph we reached the level I mentioned again and again, in these pages, as a level where there is great logic to the bottom: 3.10. There is no doubt that the stage is now set for an interesting upward move in our American currency. Will it develop skin and tendons? This is in the context of a violent correction in the stock markets, and the rise of theRiskOff From the boards he has been on for so long? who knows. Only a few tracking price movements will tell us this. What is certain is that the “round” they made on us, which will cost and will cost us about $ 50 billion in 2020-2021, is unbearably expensive. Let’s hope that 2021 will find the better solution for exporters. The one that does not require allocating so much financial resources in order to fight a relatively small amount of highly professional currency traders.
