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Amid lack of headlines and events, the U.S. dollar recovered some ground after the dismal NFP figure took its toll on the currency last Friday. Against the yen, the USD reached its highest in almost 4 years as the BoJ embarks on an aggressive stimulus plan to boost growth and fight deflation.

The fact that the dollar continued to rise versus the yen despite the lackluster employment data and other signs of a slowdown in the U.S. recovery puts in evidence yen weakness and reinforces the view that USD/JPY targets 100.

Meanwhile, EUR/USD failed to overcome the 1.3040/50 resistance area once again on Monday. With the unresolved Italian election and Cyprus situation still weighing on the shared currency, the longer-term bias remains neutral for the cross and the pair may struggle to regain its March 25 peak of 1.3050 needed to fuel the pair's rally.

Euro loses momentum after technical failure

After being rejected once again by the 1.3040 zone EUR/USD weakened, although it has held above the 1.3000 psychological level, keeping the short-term positive bias alive. As indicators correct from overbought levels, EUR/USD could extend its correction, with 1.2970 (23.6% retracement of the 1.2746/1.3040 rally) as next significant support.

On the upside, a clear break above 1.3040/50 could see a spike toward the 1.3100 ahead of 1.3130, where the 100-day SMA could offer resistance to the cross.

"The EUR has caught a bid ever since Draghi's comments at last week's ECB meeting suggested they had a preference for targeted policy tools over rate cuts. Worries that Portugal's bailout could be at risk have been shrugged off so far", says the TD Securities team.

"The close above the much talked about 200-day moving average was the first key signal of constructive price action, and the subsequent squeeze up to mid 1.3050/60 area-just above spot-is the next test", TD Securities comments. "A push beyond that area would look to 1.3140/50 (near 50- and 100-day moving averages) initially. Broadly speaking, we remain somewhat neutral on the EUR for now, but prefer buying breaks of the above mentioned resistance areas".

Source: USD Recovers After Disappointing Payrolls