USD/CAD drops as Canada scraps Digital Services Tax for trade talks

USD/CAD declined sharply following Canada's announcement to rescind its Digital Services Tax, aimed at advancing broader trade negotiations with the United States. The Canadian dollar strengthened immediately after the Finance Ministry's Sunday statement, reversing Friday's weakness when President Trump had canceled trade talks with Canada. This diplomatic gesture suggests both nations are working toward a comprehensive trade agreement despite recent tensions. The move demonstrates Canada's willingness to make concessions to avoid potential tariffs and maintain favorable trade relations with its largest trading partner. Technical indicators show USD/CAD breaking below key support at 1.4350, with further downside potential toward 1.4300 if positive trade momentum continues. Traders should monitor upcoming trade announcements and any official responses from the Trump administration, as these developments could drive significant volatility in the pair throughout the week.