USD/CAD sees more weakness below 1.3540 amid a risk-on mood and a recovery in oil price

• USD/CAD is likely to display more weakness below 1.3540 as risk-on impulse firms.
• A recovery in oil prices is expected to support the Canadian Dollar.
• The fresh supply of the US Dollar amid the funding announcement by US President Joe Biden might impact the Greenback.

The USD/CAD pair is displaying a sideways profile below the crucial resistance of 1.3560 in the Tokyo session. The Lonnie asset has turned rangebound after a sell-off from the round-level hurdle of 1.3600. The major is expected to remain on the tenterhooks and may deliver more weakness ahead amid a significant improvement in the risk appetite of the market participants. Also, a rebound in the oil price might strengthen the Canadian Dollar.

The US Dollar Index is attempting to recover after a sheer drop to near 103.50, however, the risk-on impulse is acting as a major barricade. S&P500 futures are displaying some losses in early Asia after a fantastic Thursday. A minor correction in the 500-stock basket futures could be due to the long weekend ahead for New Year celebrations. Meanwhile, the 10-year US Treasury yields have dropped to near 3.82%.

The USD index is expected to remain under pressure after a surge in the United States Initial Jobless Claims released on Thursday. As per the release, 225K individuals have signed up for jobless claims for the very first time for the week ending December 23. This might be the outcome of a slowdown in the hiring process by firms after failing to execute expansion plans due to higher interest rates by the Federal Reserve (Fed).

Apart from the jobless claims data, the announcement of fresh funding for the U.S. government for the fiscal year 2023 might impact the US Dollar. Dollar supply into the economy might weaken its essence ahead. President Joe Biden on Thursday signed a $1.66 trillion bill for funding the U.S. government, as reported by Reuters.

On the oil front, projections of a revival in the overall demand in China after its reopening measures are supporting the oil price. West Texas Intermediate (WTI) has recovered after dropping to near $77.00. It is worth noting that Canada is a leading oil exporter to the United States and higher oil prices will support the Canadian Dollar.