USD/CAD recovers some lost ground near 1.3590, investors await US CPI data

• USD/CAD holds positive ground around 1.3590 amid the light economic data released.
• Market players expect the Federal Reserve (Fed) to hold interest rates in its September meeting.
• Bank of Canada (BoC) Governor said monetary policy may be appropriately restrictive to restore price stability.
• Investors will closely watch the US Consumer Price Index (CPI) data.

The USD/CAD pair recovers some lost ground but remains below the 1.3600 mark during the early Asian session on Tuesday. The pair snaps two-day losing streaks and currently trades near 1.3588, gaining 0.12% on the day.

The US Dollar attract some sellers on Tuesday amid the light economic data released. It’s worth noting that the labor data last week lends support to the higher for longer interest rate narrative in the US. The markets have been priced in the possibility of a 92% chance of a rate hold at the September meeting and a 42.4% chance of a rate hike at the November meeting, according to the CME FedWatch Tool. This, in turn, might lift the US Dollar (USD) and cap the upside of the USD/CAD.

US Treasury Secretary Janet Yellen said on Sunday that she is becoming more convinced that the US will be able to curb inflation without causing major impacts on the labor market. She added that every gauge of inflation is erasing and there was no massive wave of layoffs.

On the other hand, Bank of Canada (BoC) Governor Tiff Macklem stated on Thursday that monetary policy may be appropriately restrictive to restore price stability, but cautioned that the Governing Council is concerned with the persistence of underlying inflation. It’s worth noting that BoC decided to maintain its key interest rate at 5% last week. Meanwhile, a rally in oil prices supports Loonie’s upside as Canada is the largest exporter of crude to the US.

Moving on, the US Consumer Price Index for August and Retail Sales will be released on Wednesday and Thursday, respectively. There will be no top-tier economic data released from the Canadian docket, the USD price dynamics will continue to drive the USD/CAD pair. Traders will take cues from the figures and find trading opportunities for the pair.

Technically, USD/CAD holds above the key 100-hour Exponential Moving Average (EMA) on the daily chart, which supports the buyers for the time being. The first immediate level is seen at 1.3600 (a psychological round mark) and the initial support level is located at 1.3550 (a low of August 30).