EUR corrects higher ahead of critical ECB decision

The EUR/USD pair holds on its substantial gains and trades in the 1.0160 price zone after hitting a daily high of 1.0200. The US dollar remained weaker on Monday amid a significantly better performance in the stock markets.

Investors are still concerned about looming recessions and overheated inflation, but at this point, it looks that policymakers would not do much more than what they have long ago anticipated.

This week, the European Central Bank will announce its monetary policy decision, already priced in as President Christine Lagarde has anticipated a 25 bps rate hike. The ECB is among the most conservative central banks, one of the reasons why EUR/USD pierced through parity last week.

Data-wise, this week started in slow motion. The US published the July NAHB Housing Market Index, which contracted to 55 from 67 in June, while it will release May TIC Flows with Wall Street’s closing bell. On Tuesday, the EU will release the final June inflation figures, expected to be confirmed at 8.6% YoY. On the other hand, the US will release June Building Permits and Housing Starts.

Technically; the daily chart shows that the pair is in a corrective advance that could continue in the upcoming sessions. Technical indicators maintain bullish slopes within negative levels but far below their recent lows in extreme oversold territory. However, the pair remains below bearish moving averages, with the 20 SMA heading firmly lower and providing dynamic resistance at around 1.0310.