USD/CAD recovers modestly on USD strength, trades above 1.3800

• Crude oil gains traction on Friday, WTI adds more than 7%.
• US Dollar Index climbs higher toward the 98 handle.
• Coming up: UoM Consumer Confidence Index and Import/Export Price Index from US.

The USD/CAD pair rose to its higher level in more than five years at 1.3963 on Thursday boosted by the broad USD strength and the heavy selling pressure surrounding the crude oil. With the market sentiment improving on Friday and crude oil staging a decisive rebound, the pair reversed its direction and fell all the way to 1.3780 before starting to erase its losses. As of writing, the pair was still down 0.7% on the day at 1.3830.

Positive shift in risk sentiment

The panic-selling that has been dominating the financial markets since the start of the week finally seems to have softened with major central banks and economies taking steps to tackle the coronavirus outbreak's negative impact on the economic activity.

Major European equity indexes are registering decisive gains and the risk-sensitive West Texas Intermediate (WTI) is rising more than 7% to help the commodity-sensitive loonie find demand.

However, the sharp rebound witnessed in the 10-year US Treasury bond yield is providing a boost to the greenback and allowing the pair to pull away from its lows. Ahead of the Import/Export Price Index and the UoM Consumer Confidence Index data from the US, the US Dollar Index is up 0.4% on the day at 97.92.

Technical levels to watch for