USD/CAD rebound toward 1.4400 as DXY erases majority of early losses

• US Dollar Index rebounds to 102.50 in American session.
• WTI erases majority of early gains, down more than 20% for the week.
• Retail Sales in Canada rose more than expected in January.

The USD/CAD pair dropped to a daily low of 1.4150 on Friday but staged a rebound during the American trading hours. As of writing, the pair was trading at 1.4370, erasing nearly 1% on a daily basis. On a weekly basis, the pair is still up nearly 500 pips.

Selling pressure on USD softens

After rising to its highest level in more than three years at 102.99 earlier in the day, the US Dollar Index dropped all the way to 101.09 as the Federal Reserve's reestablishment of USD swap lines with major central banks helped ease concerns over USD shortages.

Although the Fed announced that it enhanced the USD swap line with the Bank of Canada on Friday, the pair continued to erase its losses as risk-aversion ahead of the weekend ramped up the demand for the greenback. As of writing, the US Dollar Index was at 102.55, down 0.38% on a daily basis.

Reflecting the sour market mood, the risk-sensitive crude oil retraced a large portion of its daily rebound and made it difficult for the CAD to preserve its strength. At the moment, the barrel of West Texas Intermediate (WTI) is still up 2% on the day at $25.50.

Meanwhile, the only data release from Canada on Friday showed that Retail Sales in January expanded by 0.4% to beat the market expectation of 0.3% but was largely ignored by the market participants.

Technical levels to watch for