Is This The Beginning Of A Bear Market?

The US dollar has risen against almost everything as investors looked for shelter. Many traders now question whether the Ukraine war could be the beginning of a bear market. Prices whipsawed when the Russian military invaded Ukraine last week. Still, some traders saw it as an opportunity to “buy the invasion,” a behavior that has led to a tremendous reversal in the market.

While buying-the-dip gains show investors are piling in, more voices are now warning investors to be careful. Russia’s invasion of Ukraine will cause higher inflation which will force the Federal Reserve to increase interest rates. The invasion also increases the risk of stagflation when inflation remains high while economic growth and unemployment are also high.

The conflict in the middle of Europe could thus mean the end of the bull era of central bank excess and signal the beginning of a bear era of government intervention, social and political polarization, and geopolitical isolationism, according to a Friday note from Bank of America Research.

However, while most of the past market declines did not become bear markets, the risk of a bear market is currently higher than any other time. However, the sentiment will depend on developments and may change any day.

EUR/USD – Opening With A Downside Gap

The down gap indicates a continuation of the downtrend, but before bears assume the downtrend to resume, we may see short covering filling the gap. In other words, we may see a correction towards 1.1240 before selling pressure increases again. Nevertheless, if the EUR/USD pair drops below 1.1090, we brace for a decline towards 1.09.

EUR/USD H4 timeframe chart.

DAX – Heading South

The DAX opened with a downside gap and could now face the lower support area at around 13600. Short-term bulls will watch out for prices above 14400, with higher targets seen at 14500 and 14800.

DAX daily chart.