USD/CHF consolidates in a range around mid-0.9200s, downside seems cushioned

• USD/CHF was seen oscillating in a narrow trading band through the early European session.
• A positive risk tone undermined the safe-haven CHF and acted as a tailwind for the major.
• Retreating US bond yields held back the USD bulls from placing fresh bets and capped gains.

The USD/CHF pair lacked any firm directional bias and oscillated in a narrow trading band, around mid-0.9200s through the early European session.

The pair struggled to capitalize on Friday's post-NFP strong move up and witnessed subdued/range-bound price move on the first day of a new week, though a combination of factors helped limit the downside. A generally positive tone around the equity markets undermined the safe-haven Swiss franc and acted as a tailwind for the USD/CHF pair amid modest US dollar strength.

The USD remained well supported by the upbeat US jobs report, which revived speculations for a larger Fed rate hike move at the March policy meeting. Investors now seem convinced that the US central bank will adopt a more aggressive policy stance to contain stubbornly high inflation, which was evident from the recent sharp rise in the US Treasury bond yields.

In fact, the yield on the 2-year and 5-year, which are more sensitive to rate hike expectations, rose to the highest level since February 2020 and July 2019, respectively, on Friday. Hence, the market focus now shifts to the release of the latest US consumer inflation figures for January, due on Thursday, which would provide a fresh impetus to the USD/CHF pair.

In the meantime, a pullback in the US bond yields might hold back the USD bulls from placing aggressive bets. This, in turn, was seen as the only factor that kept a lid on any meaningful upside for the USD/CHF pair, at least for the time being. Nevertheless, the fundamental backdrop seems tilted in favour of bullish traders and supports prospects for additional gains.

There isn't any major market-moving economic data due for release from the US, leaving the USD at the mercy of the US bond yields. Apart from this, traders will take cues from the broader market risk sentiment to grab some short-term opportunities around the USD/CHF pair.

Technical levels to watch