Shows new high for 2024 but diverging with RSI

• AUD/USD hit a new high for the year and could extend higher.
• It shows a bearish divergence with the RSI, so there is a risk of a pullback developing.

AUD/USD hits a new 2024 high at 0.6839 on Thursday after extending the leg that started at the 9/11 lows. Since then, it has declined marginally to above the 0.6800 mark.

AUD/USD Daily Chart

The price is showing a slight downward divergence with the Relative Strength Index (RSI) momentum indicator (dashed red lines in the chart above). This happens when the price reaches a new high, but the RSI does not. Disconfirmation is a bearish sign as it indicates mild underlying weakness. It suggests that AUD/USD is at risk of a pullback.

If a correction develops, it is likely to find support around 0.6800 (July high), 0.6755 or 0.6698 (August 22 low).

AUD/USD has been in a near-term uptrend, however, since the 9/11 low, and given that it is a principle of technical analysis that “the trend is your friend”, it is likely to continue higher eventually – despite bearish divergence with RSI. A break above the annual high of 0.6839 would confirm a continuation of the uptrend to a target at 0.6870 (December 2023 high).