Shekel Underperforms As Israel Strikes Gaza Targets, Prepares For Retaliation

USD/ILS gapped higher at the re-open amid an escalation of violence in the Gaza Strip. The IDF conducted targeted strikes across the area overnight, killing three senior Islamic Jihad leaders and at least ten more Palestinians. The decision was reportedly taken by the PM and Defence Minister without consulting the Cabinet. Israel is currently preparing for an exchange of fire as a grouping of Palestinian paramilitary groups vowed to retaliate.

• Spot USD/ILS trades +264 at ILS3.6588 and bulls look for a resumption of gains towards Apr 12 high of ILS3.6934 and key resistance from Mar 20 cycle high of ILS3.7130. Bearish focus falls on May 2 low of ILS3.6049, followed by Apr 4 low of ILS3.5603.
• USD/ILS implied volatilities have ticked higher across the curve, but remain within familiar ranges, still subdued relative to levels seen in the midst of the political crisis caused by the government's controversial judicial overhaul.
• The shekel is the worst performer in the EMEA region at typing and one of the worst performers in the world, losing 0.7% to the greenback and 0.6% to the euro.