USD/CHF clings to gains below 0.9200 mark, lacks bullish conviction amid cautious mood

• USD/CHF gained some positive traction on Monday amid a goodish pickup in the USD demand.
• The cautious market mood underpinned the safe-haven CHF and kept a lid on any further gains.
• Investors seemed reluctant to place aggressive directional bets amid the year-end thin liquidity.

The USD/CHF pair maintained its bid tone through the early part of the European session, albeit seemed struggling to reclaim the 0.9200 round-figure mark.

Having shown some resilience below the 200-day SMA, the USD/CHF pair edged higher on the first day of a new week and reversed Friday's slide back closer to the monthly low, around the 0.9165-60 area. The uptick was exclusively sponsored by a goodish pickup in demand for the US dollar, which drew some support from the Fed's hawkish outlook.

Meanwhile, uncertainty over the economic impact of surging new COVID-19 cases overshadowed the recent optimism led by reports that the Omicron variant might be less severe than previously feared. This, in turn, tempered investors' appetite for perceived riskier assets, which benefitted the safe-haven Swiss franc and capped gains for the USD/CHF pair.

The flight to safety was reaffirmed by retreating US Treasury bond yields, which acted as a headwind for the USD and further held back bulls from placing aggressive bets around the USD/CHF pair. Traders also seemed reluctant amid the end-of-year thin liquidity conditions in the markets and absent relevant market moving economic releases.

The mixed fundamental backdrop warrants some caution before positioning for any further appreciating move. Even From a technical perspective, last week's sustained break below the 0.9200 mark favours bearish traders, making it prudent to wait for a strong follow-through to confirm that the recent slide from the 0.9250 supply zone has run its course.

Technical levels to watch