Forex Flash: EUR/USD most shorted currency pair – UBS

FXstreet.com (Barcelona) - Looking back at the last 12 months, it is rather interesting to see that, with the exception of the Swiss franc (for obvious reasons), G10 FX have not ended the year with significant longs or shorts, which paves the way for major shifts heading into 2013. The USDJPY may have had the best run on price action alone heading into year-end, but the selective profit-taking by hedge funds ahead of difficult fiscal cliff negotiations has taken some shine off the pair's overall performance.

According to Research Analyst Geoffrey Yu at UBS, "We continue to stress that real money has been a very reluctant participant in the move and, if current levels can hold heading into 2013, the stage is set for further upside." The euro remains the 'most short' currency, but the ECB and Eurozone leaders can probably sign off the year on a more buoyant tone and again dare the market to take on the currency in 2013.

In addition, "We believe current positioning levels make it very hard for any client class to add fresh shorts in the near term, unless event risk points again to an existential crisis for the currency. On this note, we believe that the Eurozone leadership should not be complacent." Yu adds.