Investing.com - The euro gave up slender gains against the dollar on Monday, falling back towards a 14-month trough after European Central Bank President Mario Draghi warned that the recovery in the euro area is losing momentum.
EUR/USD was last trading at 1.2835, off session highs 1.2868 and close to Friday’s 14-month lows of 1.2827.
The pair was likely to find support at the 1.28 level and resistance at around 1.2875.
In remarks to the economic and monetary affairs committee of the European parliament, Draghi said economic activity in the euro area has slowed and there’s a risk of a further downturn.
“The risks surrounding the expected expansion are clearly on the downside,” Draghi said. “Recent indicators gave no indication that the sharp decline” in economic activity in the currency bloc has stopped, he added.
He reiterated that the ECB expects inflation to remain at low levels over the coming months before increasing gradually in 2015 and 2016.
Draghi said the ECB "remains ready to use additional unconventional instruments within our mandate, should it become necessary to further address risks of a too prolonged period of low inflation".
Data last week showed that the annual rate of euro area inflation was steady at 0.4% in August, the lowest level in almost five years.
Demand for the greenback continued to be underpinned as indications that the U.S. economic recovery is making solid progress fuelled expectations that the Federal Reserve will hike interest rates sooner than markets are expecting.
Last week, the Fed offered fresh guidance on its plans to raise interest rates, outlining in more detail how it will start to raise short term interest rates when the time comes.
The dollar shrugged off data showing that new home sales in the U.S. unexpectedly fell 1.8% to an annual unit rate of 5.05 million in August. Analysts had expected existing home sales to rise 1% to 5.20 million units.
Elsewhere, the euro was flat against the yen, with EUR/JPY at 139.91, after rising to highs of 140.21 earlier.