By David George-Cosh TORONTO--The Canadian dollar strengthened against the U.S. dollar, testing parity, after a surprisingly positive read of the U.S. labor sector. U.S. non-farm payroll figures showed a gain of 163,000 new jobs in July, beating expectations of 95,000 new jobs, according to a survey of economists by Dow Jones Newswires. The U.S. dollar is at C$1.0017 Friday, from C$1.0033 before the release of the data from C$1.0073 late Thursday, according to data provider CQG. While the Canadian dollar may be testing parity levels following the positive jobs report, CIBC World Markets head of FX strategy Jeremy Stretch "expect the barrier to be well defended." Earlier on Friday, the Canadian dollar retraced its losses and returned to test parity as traders unwound their positioning on the U.S. dollar following Thursday's disappointing press conference by European Central Bank President Mario Draghi. Mr. Draghi frustrated investors who expected the central bank to provide firm and decisive action in resolving the European debt crisis. Still, interest in the Canadian dollar may be "relatively scarce" Friday with no Canadian jobs data and a long weekend ahead for the domestic market, TD Securities said in a note. Write to David George-Cosh at david.george-cosh@dowjones.com

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