Forex Flash: EUR/USD eyes Italian election results – UBS

The market was unquestionably on a risk-averse footing over the past week as we saw heavy flows in major pairs, all expressing a negative view on their respective macro drivers. In particular, the EUR/USD suffered a fourth straight week of heavy selling, with hedge funds continuing to take off their longs.

Although net volumes were softer compared to the prior week, our books have now shown over $8.0B in net EUR/USD sales over the past four weeks, the bulk of which led by the leveraged community, with some addition flows from asset managers. According to Research Analysts Gareth Berry and Geoffrey Yu at UBS, “This suggests that if the upcoming Italian election results are shown to be 'benign' from a markets' perspective, then the EUR/USD upside could be one of the bigger movers as positioning is quite clear.”