07:52 AM EDT, 08/08/2025 (MT Newswires) -- With the US dollar (USD) broadly picking up in the second half of July amid a flurry of tariff news, USD/CAD broke the 1.38 mark, said UBS.

The bank noted it continues to see USD downside from here and doesn't expect the current level to be sustained for long.

The July United States job market print was the first sign of more pronounced weakness and UBS thinks more will follow in the coming weeks.

Additionally, the Canadian side has been holding up better than expected and the bank doesn't expect the announced 35% U.S. tariff will be sustained.

In addition, goods under the current USMCA trade agreement -- which make up most of Canada's exports to the U.S. -- are exempt.

Lastly, Canadian inflation has been on the rise, speaking for a more hawkish approach by the Bank of Canada -- as could be seen at the latest policy meeting -- and a brighter outlook from a relative rates perspective.

UBS pointed out it likes taking short positions in USD/CAD with a target of 1.35 over the next three months and sees a stop-loss level of 1.40 as "prudent."