The AUD/USD pair is currently edging higher towards the top of a long-term range, with momentum diverging bearishly from price. Despite this divergence, the pair continues to post green candlesticks as it steadily moves higher. Recently hitting a new high of 0.6839, the trend remains short-term bullish. However, the bearish divergence with the Relative Strength Index (RSI) indicates a potential risk of a pullback in the near future.
Looking at the daily chart for AUD/USD, the bearish divergence with the RSI momentum indicator is evident. This divergence occurs when the price reaches a new high, but the RSI fails to do so. This lack of confirmation is seen as a bearish signal, suggesting some underlying weakness in the pair. If a correction does occur, potential support levels to watch for are around 0.6800 (July high) and 0.6736.
Despite the bearish divergence with the RSI, AUD/USD remains in a short-term uptrend since the September 11 low. According to the principle of technical analysis that “the trend is your friend,” there is a higher probability of a continuation of the uptrend eventually. A break above the 0.6839 level would confirm the continuation of the uptrend, with a target set at the 0.6870 level, which was last seen in December 2023.
In conclusion, while AUD/USD is currently edging higher towards the top of a long-term range, the bearish divergence in momentum with price poses a risk of a potential pullback. Despite this risk, the short-term trend remains bullish, and a break above the recent high could confirm a continuation of the uptrend towards the 0.6870 level. Traders should keep a close eye on support levels and technical indicators to assess any potential changes in the pair’s direction.
