USD/CHF clings to modest recovery gains near daily high, just below mid-0.9100s

• USD/CHF gained traction on Friday and reversed the overnight losses back closer to the monthly low.
• The underlying bullish tone weighed on the safe-haven CHF and extended some support to the major.
• A modest USD strength remains supportive, though any meaningful recovery move still seems elusive.

The USD/CHF pair traded with a positive bias through the early European session and was last seen hovering near the daily top, just below mid-0.9100s.

A combination of factors assisted the USD/CHF pair to attract some buying near the 0.9130 area on Friday and rebound from the vicinity of the monthly low touched earlier this week. The underlying bullish tone in the financial markets weighed on the safe-haven Swiss franc. This, along with a modest US dollar strength provided a modest lift to the USD/CHF pair.

Investors remain optimistic over signs that the Omicron variant might be less severe than feared and is unlikely to derail the economic recovery. This, to a larger extent, helped offset worries about the continuous surge in new COVID-19 cases and continued boosting investors' sentiment. This was evident from the recent runup in the global equity markets.

On the other hand, the USD edged higher for the second successive day and was supported by Thursday's upbeat US macro data. In fact, the US Initial Weekly Jobless Claims fell to the lowest level since 1969 in the week ended December 24. Separately, the Chicago PMI beat expectations and rose to 63.1 for the current month from 61.8 in November.

It, however, remains to be seen if the USD/CHF pair is able to capitalize on the recovery amid absent relevant fundamental catalyst and thin end-of-year trading volumes. From a technical perspective, the overnight sharp intraday fall of around 50 pips validated the recent break below the 200-day SMA and supports prospects for a further depreciating move.

Hence, any subsequent recovery move might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly. The USD/CHF pair seems vulnerable to prolong its recent sharp decline from the 0.9375 region, or a multi-month high touched in November and slide further towards challenging the 0.91000 round-figure mark.

Technical levels to watch