"We're still talking and it could be Abu Dhabi or Dubai," the source said. "We're confident it gets done. It's a short turnaround to the date but hopefully it will get agreed this week."
Pacquiao's legal adviser Michael Koncz also told Abu Dhabi-based newspaper, The National: "Yes, the fight will be held in the UAE."
Dubai's Sevens Stadium, built to host the city's rugby sevens tournament nine years ago, can be configured to have a capacity in excess of 40,000. Both of the stadiums under consideration in Abu Dhabi are of a similar size and traditionally host football matches. The fight is expected to attract a large gate in the UAE where there is a big Filipino community. Khan, a British Muslim of Pakistan descent, is also of interest having visited the country on several occasions.
It is a clash between old friends -- who last sparred with each other five years ago while sharing the same trainer Freddie Roach -- but a number of key points still need to be agreed before it is official. One of the subjects to be resolved is the timing of the fight locally, which could potentially take place before 9 a.m. to ensure it is screened live Saturday night on U.S. television. The UAE is four hours ahead of GMT, and nine hours ahead of Eastern Time.
Eight-weight world champion Pacquiao, 38, had been due to fight Australian Jeff Horn in Brisbane on April 23 but then held an online poll asking who he should fight next, which Khan overwhelmingly won. Pacquiao has also said his next fight will be in the UAE. Khan, 30, revealed on social media that venues in the UK and U.S. are being considered, but boxing rarely happens on a Sunday in those countries.
There is also risk with holding it in the UK that ticket sales and sponsorship will be affected by the biggest fight in Britain since the Second World War -- the heavyweight collision between Anthony Joshua and Wladimir Klitschko -- which is happening less than a week later in front of 90,000 at Wembley Stadium on April 29.
The Manchester Arena and the O2 in London -- two of the most likely indoor venues in the UK -- are hosting music concerts by Ed Sheeran and Frankie Valli and the Four Seasons respectively on April 23 while using an outdoor venue at the time of year is a risk due to the weather.
Bolton's former world light-welterweight champion Khan (31-4, 19 KOs) was last in action when he was knocked out by Mexican Canelo Alavarez in May, when the Briton stepped up two weight divisions to challenge for the WBC world middleweight title.
Pacquiao (59-6-2, 38 KOs) now juggles his boxing career with his political commitments in his role as a Senator of the Philippines. He out-pointed Jesse Vargas in November to reclaim his old belt in his second win since being out-pointed by Floyd Mayweather Jr. in May 2015.