USD/CAD volatile as US-Canada talks resume before midnight tariff deadline

USD/CAD is trading with elevated two-way risk as Canadian and US negotiators prepare to meet again ahead of the midnight tariff deadline, with the pair hovering near the 1.3900 area. The resumption of talks signals that diplomatic channels remain active, offering the Canadian dollar a degree of support, but the backdrop remains one of considerable uncertainty over whether an agreement can be reached in time. The threatened tariff escalation represents a material downside risk to Canadian growth and export earnings, which would justify a higher USD/CAD if implemented. Conversely, a negotiated resolution would remove a significant risk premium from the loonie. Technically, resistance is seen at 1.3900-1.3950, with a decisive break exposing higher levels, while support rests near 1.3860 and then 1.3800. Traders should anticipate thin liquidity and headline-driven spikes into the deadline, making position sizing and stop placement critical. Oil price movements and Bank of Canada rate expectations remain secondary drivers while trade headlines dominate the CAD narrative.