USD/CAD drops to fresh 2-week lows below 1.35

• Disappointing PMI data forces greenback to weaken further.
• US Dollar Index stays in the red below 96.50.
• Oil recovery loses momentum as risk-aversion takes control of markets.

The USD/CAD pair extended the slide that started in the early NA session and fell below the 1.35 mark for the first time since December 20. As of writing, the pair was down 100 pips, or 0.75%, on the day at 1.3475.

Earlier today, the decisive recovery seen in crude oil prices with the barrel of West Texas Intermediate rising above the $47 mark provided the initial boost to the commodity-sensitive loonie. Although the WTI retreated to $46.70 area in the last hours, the bearish momentum surrounding the pair remained intact amid a broadly weaker greenback.

Following the ISM Manufacturing PMI data, which came in at 54.1 in December to miss the analysts' forecast of 58, the US Dollar Index slumped to a daily low of 96.20. As of writing, the index was down 0.4% on the day at 96.30. With today's data out of the way, investors now will wait for tomorrow's employment figures from both Canada and the U.S.

Previewing tomorrow's NFP report, "The greenback has profited from risk averse flows towards the year end as equity losses and gloomy economic prognostications led traders to safety. A good US employment report will allay some of the contaigion fears for the US economy  but without a trade agreement with China the global complexion and the dollar bid will change little," said FXStreet senior analyst Joseph Trevisani.

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