USD/CHF jumps to four-day high, bulls looking to seize control above 0.9220 hurdle

• A combination of factors prompted some short-covering around USD/CHF on Monday.
• Easing Omicron fears boosted investors’ confidence and undermined the safe-haven CHF.
• The USD drew support from hawkish Fed expectations and rebounding US bond yields.

The USD/CHF pair shot to a four-day high during the early North American session, albeit quickly retreated a few pips thereafter. The pair was last seen trading around the 0.9220 region, still up nearly 0.45% for the day.

The pair once again showed some resilience below the very important 200-day SMA and attracted fresh buying near the 0.9160 area on the first day of a new week. The risk-on impulse in the financial markets undermined the safe-haven currency. This, along with sustained US dollar buying interest, provided a goodish lift to the USD/CHF pair.

Reports that Omicron patients only had relatively mild symptoms eased fears about the potential economic fallout from the new variant of the coronavirus and boosted investors' confidence. This was evident from a generally positive tone around the global equity markets, which, in turn, drove flows away from traditional safe-haven currencies.

On the other hand, the prospects for a faster policy tightening by the Fed continued acting as a tailwind for the USD and provided an additional lift to the USD/CHF pair. In fact, the markets have been pricing in the possibility for an eventual interest rate hike by May 2022 amid worries about stubbornly high inflationary pressures.

Apart from this, a solid rebound in the US Treasury bond yields further benefitted the greenback and pushed the USD/CHF pair beyond the 0.9215-20 supply zone. This could be seen as a fresh trigger for bullish traders, though the lack of a strong follow-through buying warrants some caution before positioning for any further appreciating move.

There isn't any major market-moving economic data due for release from the US, leaving the USD/CHF pair at the mercy of the USD price dynamics and the broader market risk sentiment. Nevertheless, the fundamental backdrop supports prospects for additional near-term gains and a move towards testing the next relevant hurdle near the 0.9265-70 region.

Technical levels to watch