USD/CAD rallies on weak Canadian data, EUR/USD testing critical support

Canadian dollar drops sharply after the much-weaker-than-expected employment report. EUR/USD testing critical $1.10 support which, if broken, could signal new nearly two-year highs for greenback.

USD/CAD rallied strong following key employment data out of Canada that was much weaker than expected, with Statistics Canada reporting that the economy shed 1800 jobs in October vs market expectations of an increase in jobs of about 10,000. USD/CAD rose over 50 pips on the news to the $1.3235 area before pulling back to the $1.3220 area.

Big test of euro support near $1.10

EUR/USD was pushing toward a key test of the $1.10 support level, trading in early morning New York action around $1.1025. If the greenback can push through $1.10 in a meaningful way it will likely reveal October’s strong euro rally as simply a pullback in a continuation of a nearly two-year US dollar uptrend. A near universal sense that the US is not heading toward recession, a big reversal of views held this summer, the Federal Reserve (Fed) signaling a pause in lower rates and positive carry holding greenbacks are all underpinning strength in the US dollar.

The University of Michigan sentiment index, viewed as a major economic indicator, is due this afternoon and if it shows strong positive sentiment could be what's needed to take the greenback to new recent highs.

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