ILS: Shekel Sinks As Israel Weighs Options For Retaliation Against Hezbollah

The shekel starts the week on a softer footing amid a military escalation in the Middle East, with Israel on the verge of launching a retaliation strike against Hezbollah in Lebanon. Spot USD/ILS trades at 3.7117, nearly 500 pips better off, hitting its best levels since Jul 5. Further gains past Jul 1 high of 3.7810 would give bulls more confidence. Bears look for a pullback towards Jul 12 cycle low of 3.5800.

• The Times of Israel reports that "ministers authorized Prime Minister Benjamin Netanyahu and his defence chief Sunday to decide on the “manner and timing” of a response to a rocket strike in the Golan Heights that killed 12 children and teens." The strike is believed to have been launched by Hezbollah from the territory of Lebanon.
• Axios circulated a source report noting that the Biden administration warned Israel that attacking Hezbollah targets in Beirut could cause the situation to "spiral out of control," with diplomats working behind the scenes to de-escalate tensions. flights at Bairut airport have been cancelled or delayed in anticipation of a possible Israeli attack.
• The TA-35 Index fell sharply as trading re-opened on Sunday, but has now stabilised, adding 0.7% today.