Forex Market: EUR/USD edges lower following better-than-expected US construction data

The euro declined against the US dollar on trading Tuesday, after building permits in the US rose more-than-expected in February, backing the case for further stimulus cuts before the Federal Reserve starts a two-day meeting later today.

EUR/USD touched a session low at 1.3890 at 10:00 GMT, after which the pair trimmed some losses to trade at 1.3902 at 14:08 GMT, losing 0.14% for the day. Support was likely to be received at March 17th low, 1.3880, while resistance was to be encountered at March 17th high, 1.3948.

Building permits for future projects rose 7.7% to a 1.018 million annualized pace last month, the most since October, data by the US Department of Commerce showed today. The number of permits filed for future projects in January was upward revised to a 0.945 million pace from a 0.937 million reported earlier. Analysts had expected a smaller gain to a 0.960 million pace in February. The increase reflected a surge in applications for apartment-building construction. However, one-family building permits declined for a third consecutive month, reaching the weakest level in a year.

At the same time, housing starts declined at a 0.2% annualized rate to 0.907 million last month, after a revised up 0.909 million pace in the previous month. Analysts had predicted an increase to 0.910 million housing starts in February.

A separate report revealed that consumer prices in the US rose 0.1% in February, in line with analysts projections and matching Januarys advance. Data also showed that more than 50% of the increase was due to higher food costs.

The Federal Reserve, which reduced monthly bond buying by $10 billion at the prior two meetings, will cut purchases by another $10 billion to $55 billion, and continue reductions at the same pace at every meeting before exiting the program at its Oct. 28-29 gathering, according to a Bloomberg survey.

Meanwhile, the 18-nation common currency was pressured after economic sentiment data for Germany and for the euro zone as a whole came in well-below expectations.

Economic sentiment in the largest euro area economy, Germany, deteriorated sharply, reaching a 7-month low in March, data by the ZEW Centre for Economic Research showed today.

The ZEW (Zentrum für Europäische Wirtschaftsforschung), reported that its index of German economic sentiment slid by 9.1 basis points to reach 46.4 this month, the weakest level since August, from a reading of 55.7 in February. At the same time, analysts had expected a smaller drop by 2.7 basis points to 53.0 this month.

In addition, the euro area economic sentiment also registered a decline, coming in at 61.5 in March, down from 68.5 in the previous month and as analysts projected the index will decline to 67.3 this month.

Elsewhere, EUR/CAD touched a session low at 1.5332 at 12:51 GMT, after which consolidation followed at 1.5341, losing 0.3% for the day. Support was likely to be received at March 13th low, 1.5310, while resistance was to be met at March 17th high, 1.5448.