Jan 2 (Reuters) - EUR/USD looks set to drop further in January and thanks to the pair's prominence as the most highly traded pairing, a slide will influence other currencies which are also likely to lose more ground against the U.S. dollar.

Between September and November EUR/USD swiftly dropped from 1.1214 to 1.0332 with the plunge to last year's low at 1.0332 from 1.0498 unfolding in just minutes on November 22.

The oversold situation has since been alleviated with EUR/USD reaching 1.0630 on December before falling close to last year's low where it remains.

The collapse seen in November suggested that traders were badly positioned and while an $8.9 billion speculative short position has emerged, it is far smaller than bets in excess of $25 billion needed to curtail EUR/USD trends in the past.

The dollar's ascent, that has taken its trade weighted value within a whisker of the high for an uptrend that began in 2011, has unsettled emerging currencies which have slumped in value fuelling risk aversion that's supporting the dollar which is the global reserve currency.

If central banks trying to curb the dollar's rise versus their currencies seek to maintain the size of their FX reserves - which is usual practice - then they will probably sell EUR/USD in order to do so.

The weight of central bank sales will add to the risk averse demand for dollars stemming from flight from emerging markets, and the weight of selling linked to an increasingly bearish tech outlook.

Without the restraint of a big speculative short position EUR/USD could threaten parity, or perhaps drop below it toward 0.9747 which is the main technical objective drawn off last year's high and low and subsequent recovery high reached at the start of December.
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(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)