USD/CAD languishes below 1.3780 ahead of Canadian and US data releases

• The US Dollar extends losses against the CAD, with bears looking at the 1.3760 weekly low.
• Hopes that the Fed will announce a deeper easing cycle are hammering the US Dollar.
• The Bank of Canada is also expected to cut rates by 25 bps on Wednesday.

The US Dollar extends losses on Tuesday after a nearly 0.5% decline on Monday. Bears are focusing on 10-day lows, at 1.3760, with upside attempts capped below 1.3780 as the market awaits Canadian CPI and US Retail sales to frame interest rate decisions later this week.

The Greenback sold off on Monday, as investors turned their attention to the Fed's two-day monetary policy meeting starting today. The sharp deterioration of the labour market has raised concerns that the bank might be behind the curve with rate cuts, and traders anticipate a dovish turn after Wednesday's meeting.

US Retail Sales, Canada's CPI to frame central banks' decisions

Later today, US Retail Sales are expected to show a slight decline in consumption, mainly driven by lower vehicle purchases in August. The final data, however, is not expected to alter the view that the Fed will cut rates by 25 bps on Wednesday and signal further monetary easing ahead.

In Canada, the Consumer Price Index is seen stalling in August but accelerating to a 2% yearly pace from the previous month's 1.7% reading. Likewise,  BoC's CPI is seen ticking up to a 2.7% annual increase from 2.6% in July and 2.5% in May.

The Bank of Canada, however, is widely expected to cut rates to 2.5% aiming to support a slowing economy and a quickly loosening labour market, and probably hint at further easing down the road. Nevertheless, investors seem more focused on the Fed, at least for now, which is giving the CAD a competitive advantage.