Investing.com -- EUR/USD rose sharply on Tuesday, extending slight gains from the previous session, as soft housing data in the U.S. weighed heavily on economic sentiment, pulling the greenback to near eight-month lows.
The currency pair traded between 1.1303 and 1.1385, before settling at 1.1361, up 0.0054 or 0.42% on the session. The euro posted its fourth straight win against the dollar to close above 1.13 for the second consecutive session. Last week, the euro ended the week by closing below 1.13 in each of the last four trading days. After concluding 2015 down by approximately 10% versus its American counterpart, the euro has rallied more than 4.5% this year.
EUR/USD likely gained support at 1.0538, the low from December 3 and was met with resistance at 1.1496, the high from Oct. 15.
On Tuesday morning, the U.S. Census Bureau said building permits fell 7.7% in March to 1.086 million, extending declines of 2.2% over the previous month. The reading also fell sharply below consensus estimates of 1.200 million, as permits in the Northeast tumbled more than 21% on an annual basis. At the same time, housing starts fell precipitously by 8.8% last month to 1.089 million, also far below analysts' forecasts of 1.167 million. Within the data, there were wholesale declines in starts across the U.S. with the exception of the Northeast region. The weak readings could dampen analyst sentiments heading into Wednesday's release of existing home sales for the month of March. Analysts expect sales to increase modestly to 5.268 million, following sharp declines of 7.1% in February.
As a result, the U.S. Dollar Index fell more than 0.50% to an intraday low of 93.89, before recovering slightly to settle at 94.07. The index, which measures the strength of the greenback versus a basket of six other major currencies, is now percentage points away from hitting eight-month lows from last week.
Elsewhere, the euro received a boost from stronger than expected economic data as the Eurozone ZEW index of economic sentiment rose to a three-month high of 21.5 in April, up considerably from March's reading of 10.6. It was also sharply higher than consensus estimates of a monthly reading of 14.0. Within the report, inflation rose slightly above 50, providing signals that economic activity has improved enough in the euro area to avoid deflation.
Foreign exchange traders await remarks from European Central Bank president Mario Draghi on Wednesday for indications on how much longer the Governing Council could continue to employ a controversial negative interest rate policy (NIRP). Draghi's speech will take place ahead of the ECB's latest interest rate decision on Thursday afternoon. Last month, the Governing Council lowered its deposit rate deeper into negative territory at Minus-0.4%, while expanding its comprehensive quantitative easing program to 80 billion euros per month.
Yields on the U.S. 10-Year gained one basis points to 1.79%, while yields on the Germany 10-Year inched up one basis point to 0.17%. Government bond yields on 10-year U.S. and German bonds are both down by at least four basis points over the last month.