The calm of the forex market was shattered by a heavy blow—Deutsche Bank sounded the alarm late at night, dousing the recent rebound of the euro with a cold splash: "The upward trend may be coming to an end; the euro against the dollar is likely to fall back." A piece of news about the turbulent French political scene has further fueled this bearish sentiment.

Deutsche Bank's warning: Eurozone debt is a ticking time bomb

How harsh is this cold water being splashed? Just look at the debt charts of those "fragile countries" in the Eurozone:


Greece's debt-to-GDP ratio is still stuck above 170%, Italy's newly issued bonds have seen yields sneak up by 0.3 percentage points, and Spain's fiscal deficit warning light has been on for three months—behind these numbers is the market's deep anxiety about "unable to repay debts."
Analysts at Deutsche Bank bluntly stated: "The current rise of the euro feels more like a struggle. Once the debt issue spirals out of control, it will be like a domino effect, with the euro exchange rate being the first to fall."
Veteran investors should remember the dire situation during the 2012 European debt crisis: the euro against the dollar plummeted from 1.48 to 1.05, with many retail investors who bought the euro getting stuck halfway up the hill. And now, the overall debt scale of the Eurozone has expanded by 40% compared to that year, making this bomb's power only increase.

French political turmoil: the confidence vote may become the "last straw that breaks the camel's back"

The government led by French Prime Minister Borne will face a confidence vote next month, and the market generally predicts a "high probability of being overthrown." Don't think this is just a domestic issue for France; for the euro, this could be a fatal blow.


  • Political instability means policy paralysis. The fiscal reforms and debt coordination plans urgently needed by the Eurozone cannot move forward without France as the "second-in-command."

  • What investors fear most is "uncertainty." If the government collapses, French government bond yields may spike, leading to a surge in financing costs across the Eurozone—like a ship with its second engine suddenly shutting down, compromising the stability of the entire vessel.

  • Worse still, France, as the second-largest economy in the Eurozone, its turmoil will directly shake market confidence in the euro. Last Friday, the French CAC40 index fell by 1.2%, reflecting that funds were fleeing in advance.

A vicious cycle has begun: reforms are lagging, and the euro can only "lie flat".

The current Eurozone stands at a dangerous crossroads:


If high-debt countries like Greece and Italy fail to implement effective reforms (such as cutting spending and raising taxes), the EU will have to bear more "joint debt"—simply put, it means that Germany, the Netherlands, and other "wealthy countries" will help the poorer nations pay off their debts. This could spark dissatisfaction among voters in wealthy countries, further tearing apart the EU's internal consensus.
Another worse scenario: the European Central Bank may be forced to increase its bond purchases to stabilize the debt market, even lowering interest rates again. This is equivalent to "opening the floodgates," diluting the purchasing power of the euro—similar to a cup of sugary water; the more water added, the weaker the taste.
Last year, when the ECB raised interest rates, the euro against the dollar rose from 0.95 to 1.12, relying on the expectation of "tightening monetary policy." If it is now forced to shift towards easing, the rise will inevitably come to a halt.

Impact on retail investors: These pitfalls must be avoided in advance

If you hold euro assets or trade forex, these signals must be closely monitored:


  • If the euro against the dollar falls below 1.08 (the recent key support level), it may accelerate down to 1.05; don't blindly buy the dip.

  • Keep an eye on the results of the French confidence vote (expected in mid-next month); if the government collapses, the euro is likely to gap down, and chasing the rally at that time is like giving away money.

  • Avoid assets heavily reliant on the Eurozone market, such as stocks from Southern European countries, high-yield bonds, and commodity currencies linked to the euro.


The cruel reality of the forex market is that behind the seemingly calm candlestick chart lies a complex interplay of debt, politics, and policy. Deutsche Bank's warning is more of a wake-up call for the market: don't be blinded by a short-term rebound; the risks may be just around the corner.
Let's discuss in the comments: do you think the euro can hold up this time? I bet the 1.08 level is crucial; if it breaks, it's time to run.#币安钱包TGE