It reaches a new annual high, but divergent with the momentum

• GBP/USD reaches new high for 2024 on Thursday. Trend is bullish.
• However, a bearish divergence with momentum indicates an increased risk of a temporary pullback.

GBP/USD hit new high for 2024 on Thursday; the pair reached 1.3314 during trading on Thursday, the highest price of the year.

The short, medium and long-term trends are bullish, suggesting that the current is flowing north. It is a principle of technical analysis that “the trend is your friend”, so the odds further favor the advantage.

GBP/USD Daily Chart

A break above 1.3314 would confirm more upside, targeting 1.3350 and then 1.3400.

However, price is showing a bearish 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 because it indicates underlying weakness. There is an increased risk of a GBP/USD pullback.

If the pair pulls back, it will likely only be temporary as all three time frames are bullish. Support at 1.3137 is likely to catch prices lower, or if not at 1.3042 (July 18 high).