EUR/USD Forecast: Hot US core inflation could trigger a downward correction

EUR/USD trades above 1.1000 in the European session on Wednesday.
US inflation data for June could significantly impact USD’s valuation.
1.1060 aligns as a key resistance in the short term.
Following a short-lasting downward correction during the European trading hours on Tuesday, EUR/USD gathered bullish momentum and closed in positive territory. The pair stretched higher in the Asian session on Wednesday and touched its strongest level in two months at 1.1037 before retreating slightly.

The risk-positive market atmosphere made it difficult for the US Dollar (USD) to shake off the selling pressure on Tuesday. Early Wednesday, US stock index futures trade flat, helping the USD stay resilient against its rivals for now.In the second half of the day, the US Bureau of Labor Statistics will release inflation data for June. The sharp decline witnessed in the US Dollar Index since late last week suggests that investors may have already priced in a weak Consumer Price Index (CPI) reading.

On a yearly basis, the CPI is forecast to decline to 3.1% from 4% in May. The Core CPI, which excludes volatile food and energy prices, is expected to rise 0.3% on a monthly basis. In case core inflation rises at a stronger pace than anticipated in June, the USD could stage a comeback and weigh on EUR/USD. A reading in line with analysts’ estimate could also help the USD gather strength via a ‘buy the rumour, sell the fact’ market action. On the other hand, a monthly Core CPI print close to 0% could open the door for further USD weakness following the knee-jerk reaction.