The dollar was firm on Monday just beneath its strongest level since mid-January, leaving the European currency anchored near three-month lows. A pullback in U.S. treasury yields kept a lid on the U.S. currency's recent rally.

Today forex traders will look at German inflation data and consumer spending numbers due out of the U.S. to assess whether the greenback can continue on its bout of strength that has encouraged some market analysts to predict the currency, which has been on the back foot for most of the past year, can strengthen further.

The 10-year U.S. Treasury yield surpassed 3 percent last week, encouraging forex investors to buy the dollar and cut their euro exposure.

Positioning data shows that net long euro positions by speculators fell last week, but just down from a multi-year high, suggesting investors remain bullish on the single currency.

EUR/USD slipped below 1.21 down more than 0.4 percent to 1.2078, not far from its lows last week of 1.2054.

The single currency enjoyed a strong rally at the beginning of the year but uncertainty over the speed at which the European Central Bank will normalize monetary policy and some signs the region's economic rebound has peaked left the currency stuck in a trading range before the dollar's recent bounce.