USD/CAD Eyes Gains as WTI Oil Slips. 1.3750 Incoming?

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USD/CAD has been on a grind off late having finally broken out of a brief period of consolidation thanks in part to a moderate US Dollar recovery and stalling Oil prices. USD/CAD has however, failed to find acceptance above the 1.3700 handle thus far and this may be something to note for bulls moving forward.

Is the US Dollar set to benefit from Tariffs?

The US Dollar and its struggles have been well documented of late with market participants seemingly losing faith in the greenback as a safehaven. However, as the tariff deadline approaches and trade deals are announced the US dollar has shown signs of a recovery.

According to ING THINK, the average tariff rate, currently at 14%, could rise to 20%, but how it happens is crucial for the dollar. Gradual, sector-specific tariffs would likely hurt the dollar less than sudden, drastic measures. Gradual changes might also cause some inflation, keeping the Fed cautious for longer, which could support the dollar. This is something which i see as a possibility as well and is worth paying attention to as tariffs continue to be finalized

Minutes from the Fed's June meeting show most members remain cautious or hawkish, with only Waller and Bowman leaning towards a more dovish stance.

That leaves the question, have we seen the bottom for the US Dollar in 2025? From a technical standpoint the DXY has bounced off a multi-year trendline which should it hold will likely lead to further upside for the index.

Oil Prices Slips 2.2% and Could Harm Canadian Dollar

WTI Oil has failed to break above the 200-day MA and has fallen around 2.2% today as it threatens a break of the ascending trendline. The bearishness in Oil prices works in favor of further USD/CAD upside given the relationship between the loonie and Oil.

WTI Oil Daily Chart, July 10, 2025

Source: TradingView.com (click to enlarge)

A trendline break faces a key confluence area of support resting between 65.37-64.73 which could prove a tough nut to crack.

Below that a retest of 62.00 could materialize before the psychological 60.00 mark.

A bounce off the trendline could have the opposite impact and cap USD/CADs rise as well.

Technical Analysis - USD/CAD

From a technical standpoint, USD/CAD has failed to gain acceptance above the 1.3700 handle.

A break of the recent trading range may have looked like a potential opportunity but the pair has failed to kick on.

The drop in Oil prices which should have led to a further rise in USD/CAD may be struggling due to the US dollar's indecisive price action which has seen one step forward followed by a step back.

Right now a retest of the 100-day MA at 1.3638 seems more likely than a rise toward the 1.3750 psychological level.

USD/CAD H2 Chart, July 10, 2025

Source: TradingView.com (click to enlarge)

Client Sentiment Data - USD/CAD

Looking at OANDA client sentiment data and market participants are short on USDCAD with 57% of traders net-short. I prefer to take a contrarian view toward crowd sentiment and thus the fact that so many traders are short means USD/CAD prices could rise in the near-term.

However a 57%-43% is not really a major difference and may be seen as a sign of the indecisiveness from both bulls and bears who seem unsure about USD/CADs next direction.

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