Core Viewpoint - The European banking system faces significant dollar risk exposure, which could become a critical vulnerability if dollar financing markets experience turmoil, potentially impacting liquidity and credit supply to the real economy, thereby threatening the value and stability of the euro [1][2]. Group 1: Economic and Market Context - The euro/dollar exchange rate is struggling above 1.1600, with a slight increase of 0.02% reported at 1.1604, as investors await key insights from the European Central Bank regarding interest rate prospects [1]. - Concerns regarding U.S. President Trump's policies have heightened market anxieties, particularly regarding dollar financing, which has been a persistent worry for central bank leaders since the announcement of trade tariffs earlier this year [1]. Group 2: Banking Sector Vulnerabilities - The eurozone banks exhibit a significant dollar risk exposure, with dollar liabilities ranging from 7% to 28% of total liabilities and dollar assets accounting for 10% of total assets [2]. - The chief economist of the European Central Bank, Philip Lane, indicated that while eurozone banks have shown resilience, their substantial dollar risk exposure could lead to difficulties, especially if net risk exposures change abruptly, potentially constraining credit to the real economy [1][2]. Group 3: Technical Analysis of Euro/Dollar Exchange Rate - The euro/dollar exchange rate is expected to oscillate between 1.1600 and 1.1718, with current bearish indicators suggesting that if the rate fails to hold above 1.1600, it may seek support around 1.1500 [3]. - Short-term resistance levels for the euro are identified at 1.1640-1.1645, with significant support levels at 1.1580-1.1585 and critical support at 1.1560-1.1565 [3].