* Dollar gains further against the yen
* Euro struggles versus dollar after weak services PMI
* Australian dollar falls, focus on Tuesday’s RBA decision
By Wanfeng Zhou
NEW YORK, May 6 (Reuters) - The U.S. dollar rose for a third straight session against the yen on Monday and looked set to make another run at the 100 yen level after last week’s surprisingly strong U.S. jobs data rekindled optimism about the U.S. economy.
The euro slipped against the dollar after data suggested the euro zone may be falling deeper into recession this quarter. The Australian dollar tumbled nearly 1 percent following a surprise drop in retail sales.
The dollar has rallied against the yen for much of this year, hitting a four-year high of 99.94 on April 11. But the pair failed to break the psychologically important 100 mark as option traders defended the level and as worries about the U.S. economy pressured the dollar.
“There just seems to be a lot of resistance on the way up to 100,” said John Doyle, currency strategist at Tempus Consulting in Washington. “We still think the dollar is going to 100 versus the yen. It’s just a matter of when.”
Trading volume was thin due to holidays in Britain and Japan, traders said.
The dollar rose 0.2 percent to 99.23 yen, having earlier hit 99.45 yen, according to Reuters data, its strongest since April 25.
The euro rose 0.2 percent to 130.07 yen, having risen to 130.40 yen, a two-week high.
Expectations the Bank of Japan will continue to flood the economy with liquidity will continue to pressure the yen in the coming months, analysts said.
In contrast, the solid April jobs figure and upward revisions to prior months have revived talk the U.S. Federal Reserve may start to reduce asset purchases under its quantitative easing program later this year.
“Dollar/yen looks to be probing the upside not seen since end of April and preparing itself for yet another push on the mystical 100 level,” said Richard Wiltshire, chief FX Broker at ETX Capital, adding stop-loss buy orders were triggered on the break above 99.30.
Against the dollar, the euro slipped 0.1 percent to $1.3105 , retracing from a two-month high of $1.3242 set last Wednesday.
The euro zone’s business downturn dragged on in April and Germany is now suffering a contraction in business activity that has long dogged France, Italy and Spain, business surveys showed on Monday.
Analysts said the euro could drop further after European Central Bank President Mario Draghi last week hinted at the possibility of negative deposit rates. This would penalize banks for hoarding cash and could drive money out of the euro zone.
“The risks are now tilted to the downside for euro/dollar and it could test $1.30,” said Arne Lohmann Rasmussen, head of FX research at Danske Bank in Copenhagen.
Against a basket of currencies the dollar was up 0.1 percent at 82.189.
The Australian dollar fell 0.8 percent to $1.0237, hurt by a surprise drop in retail sales and slower Chinese services activity.
The Reserve Bank of Australia meets on Tuesday. Markets imply a 50-50 chance of a rate cut, but a Reuters poll showed most economists see rates steady at 3.0 percent.