The euro extended losses last week, falling to a three-week low beneath $1.35, as traders bet higher U.S. yields and growth expectations would continue to support the greenback. The euro fell to $1.3496, its lowest since Jan. 21, though for now support around that area was holding. Traders cited several options-related barriers around $1.35.
In addition, the euro remained under pressure against the dollar after falling last Thursday, weighed down by renewed jitters about the euro zone debt crisis and waning expectations that the European Central Bank (ECB) will raise interest rates soon.
Euro zone debt markets became increasingly unsettled in recent days as Portuguese 10-year bond yields reached record highs, sparking fresh concerns about funding costs in peripheral euro zone economies.
Looking ahead to this week, a batch of data is expected from the euro zone. Special attention should be given to the German ZEW Economic Sentiment and the German Prelim GDP reports. If their end results will provide disappointing data as well, investors will see it as another indication that the economy is sluggish, and the EUR might see further bearishness as a result.