The euro failed to recover from last week's bearish session, and remained at low levels against most of its major currency counterparts in Monday's trading. The EUR/USD pair continues to trade below the 1.3600 level, and the EUR/ JPY pair remains below the 112.00 level.

The euro fell against the U.S. dollar and the Japanese yen in early trading yesterday after Germany, Europe's largest economy, reported weak manufacturing data. German Factory Orders fell by 3.4 percent in December, well below expectations for a 1.4 percent drop. The market promptly reacted to the disappointing release, and the euro fell about 100 pips against both the dollar and the yen.

However the euro managed to erase most of its losses on speculation the European Central Bank (ECB) will hike rates. Governing Council member Yves Mersch said yesterday that the ECB will raise rates if the increase in inflation is not temporary. He added that as there would have to be a rigorous intervention by the monetary authorities if across the second-round effects there's the risk that this increase transforms into a plateau.

As for today, the most interesting release on the economic calendar looks to be the German Industrial Production data. Economists predict that the German industrial production grew by 0.2% on December. If the end result will provide yet another disappointing data release, then the euro might proceed with its recent bearish trend.