USD/CHF clings to gains above 0.9300, bulls have the upper hand amid positive risk tone

• USD/CHF regained traction on Monday despite a modest USD pullback from a multi-month high.
• A positive risk tone undermined the safe-haven CHF and remained supportive of the move up.
• The fundamental backdrop favours bullish traders and supports prospects for further gains.

The USD/CHF pair maintained its bid tone heading into the European session and was last seen hovering near the daily high, around the 0.9310-0.9315 region.

Following last week's modest pullback from a two-month high, the USD/CHF pair caught fresh bids on Monday and might now be looking to build on its recent strong rally from the 0.9100 mark. The positive move was sponsored by a generally positive tone around the equity markets, which tends to undermine the safe-haven Swiss franc.

On the other hand, the US dollar witnessed some profit-taking and moved away from the highest level since July 2020 touched on Friday. That said, an uptick in the US Treasury bond yields and a more hawkish tone adopted by the Fed should act as a tailwind for the buck. This supports prospects for further gains for the USD/CHF pair.

The Fed indicated last Wednesday that it could raise interest rates at a faster pace than anticipated to contain stubbornly high inflation. The market quickly started pricing in the possibility of five quarter-point rate hikes by the end of 2022 and that the first hike in March could be 50 bps, which, in turn, favours the USD bulls.

Even from a technical perspective, last week's convincing breakthrough the 0.9265-0.9270 resistance zone and the emergence of some dip-buying on Monday add credence to the positive outlook. Hence, a subsequent move back towards the monthly swing high, around the 0.9335-0.9340 region touched last Thursday, remains a distinct possibility.

Market participants now look forward to the release of the Chicago PMI later during the early North American session. This, along with the US bond yields, will influence the USD price dynamics. Traders will also take cues from the broader market risk sentiment to grab some short-term opportunities around the USD/CHF pair.

Technical levels to watch