GBP/JPY Price Prediction: Escape Gap Opens as Price Jumps Higher

• GBP/JPY opens a Escape Gap on the chart as it shoots higher.
• The gap could be a sign that the pair is in a strong uptrend that is likely to continue.

GBP/JPY gaps in price after Monday’s open as it rises following a breakout move from a Right Triangle pattern last week.

GBP/JPY 4-hour chart

The gap in GBP/JPY is probably what is classified as a “Flight Gap”. These occur during strong climbs.

The lack of volume accompanying this gap (yellow rectangle in volume) indicates that it is probably not an Exhaustion Gap at the end of the trend. Therefore, the price is likely to continue rising.

Given that GBP/JPY is in an established uptrend in the short to medium term, it will likely extend in line with the saying that “the trend is your friend.”

GBP/JPY has found resistance at the key lower high level of July 20 at 199.40 and has temporarily pulled back. This is just below the first upside target at 199.59 (blue shaded rectangle), the Fibonacci extrapolation of the 61.8% height of the Right Triangle (at its widest point) to the upside. The price is likely to eventually reach 199.59.

A break above 199.40 would add confirmation of further upside towards the target at 199.59 and 201.97, the 100% extrapolation of the height of the Triangle.

The Relative Strength Index (RSI) momentum indicator has broken out of the overbought zone (above 70) suggesting that the pair will likely retreat for a while before renewing its uptrend.

There is a good chance that the price will fall and completely close the Escape Gap before rising again. The gap bottom could provide a low-risk entry point for traders looking to enter the uptrend at an optimal point.