Exhaustion gaps may occur at the top or bottom of a formation when trends change direction in an atypically quick manner. There is no consolidation next to the broken trend line: The trend reversal is very sharp through a bullish move, looks a lot like a measurement gap.
So traders buy the currency and stay long overnight on that assumption. The following day the market opens below the previous low, generating a second gap. If the second gap is filled or does not even occur, the trading signal remains the same.
Traders do not have to get caught badly in this exhaustion gap. A sudden trend reversal is unlikely to occur in an information void.
Some sort of identifiable event triggers the move—maybe a government fall or a massive and well-timed central bank intervention. Therefore, the traders should at least be warned.
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