Divergence refers to a situation where the price action of a currency pair separates from an indicator it was previously correlated with. Divergence usually points to a weakening in the trend and a possible reversal.
Traders use leading indicators to watch for signs of divergence in a currency pair’s trend. If the correlation breaks down – that is, if price action and the indicator diverge – then the trader takes it as a signal to buy in or sell, depending on the trading strategy.
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