In trading, it’s often easy to lose for the forest for the trees, becoming too caught up in the day-to-day fluctuations that you miss the longer-term trend. By taking a step back and look at the bigger picture, the true pattern becomes clear, like those Magic Eye pictures that were so popular in the mid-’90s. That’s exactly the case with USDZAR.
Of course, the world’s reserve currency has consistently trended higher against it South African rival for months now, but the long-term monthly chart reveals that rates are now peeking out to their highest level since March 2002, a new 13-year high! As of writing, the unit is peeking out above the October 2008 high at 11.84, though the 78.6% Fibonacci retracement of the entire 2001-2004 drop at 12.00 could still cap rates later this month.
The long-term technical picture remains strongly bullish. Though this month is less than halfway complete, USDZAR is showing early signs of forming a monthly Bullish Engulfing Candle* which would show confirm the buying pressure and hint at further gains as we move through the first half of the year. Meanwhile, the monthly MACD indicator is holding above the “0” level, showing strongly bullish momentum.
Over the next couple of days, rates could easily pullback off the 2008 high, but if USDZAR can close above converging psychological / Fibonacci retracement resistance at 12.00, it could open the door for another leg up to 13.00 or even the all-time high at 13.74 later this year. Even if rates dip over the next couple of days or weeks, the long-term bias will remain higher above bullish trend line support at 11.15.