The euro extended gains against the dollar on Monday, rising above an important technical level that analysts say suggests the currency's rally is gaining momentum.

The euro rose above $1.3125 EUR=, a three-month high and the 38.2 percent retracement of a decline that began last November and ended in June around 1.1876, its lowest level since 2006. It was last up 0.6 percent at $1.3118.

Analysts said the break could provide momentum to take the euro higher, with $1.3510 marking the 50 percent retracement of the November-June move. (Editing by James Dalgleish)