USD/CHF maintains its bid tone around 0.9130-35 area, lacks bullish conviction

• USD/CHF staged a goodish rebound from the 0.9100 mark on Monday, or a near two-month low.
• The prevalent risk-on mood undermined the safe-haven CHF and acted as a tailwind for the major.
• Rising US bond yields benefitted the USD, which contributed to the intraday short-covering move.

The USD/CHF pair trimmed a part of its intraday gains and was last seen trading around the 0.9135 region heading into the North American session.

A combination of supporting factors assisted the USD/CHF pair to defend and attract some buying around the 0.9100 mark on Monday. Despite the continuous surge in new COVID-19 cases, investors remain optimistic over signs that the Omicron variant might be less severe than feared and is unlikely to derail the economic recovery. This was evident from a generally positive tone around the equity markets, which undermined the safe-haven Swiss franc.

On the other hand, the US dollar drew some support from a fresh leg up in the US Treasury bond yields and reversed a major part of Friday's decline to the lowest level since November 30. In fact, the yield on the benchmark 10-year US government bond shot to 1.54%, back closer to a near one-month high touched last week. This, along with the Fed's hawkish outlook further acted as a tailwind for the greenback and provided a goodish lift to the USD/CHF pair.

The uptick, however, lacked bullish conviction and remained capped amid quiet holiday trading. Traders also seemed reluctant to place aggressive bets, rather preferred to wait on the sidelines ahead of important US macro data scheduled at the beginning of a new month. This week's US economic docket highlights the release of ISM PMIs and the ADP report. The market focus, however, will remain on the closely-watched US monthly jobs report (NFP) on Friday.

In the meantime, the US bond yields will play a key role in influencing the USD price dynamics and provide some impetus to the USD/CHF pair. Apart from this, traders will take cues from developments surrounding the coronavirus saga and the broader market risk sentiment to grab some short-term opportunities. Nevertheless, the pair, for now, seems to have stalled its recent downward trajectory, though any meaningful recovery still seems elusive.

Technical levels to watch