USD/CHF fluctuates in narrow channel above 0.9700

• Major European equity indexes post small gains on Monday.
• US Dollar Index advances to 97.50 area following Friday's drop.
• Market sentiment turns positive as markets wait for US and China to sign phase-one deal.

The USD/CHF pair closed the previous week virtually unchanged near 0.9720 and seems to be having a difficult time making a decisive move in either direction on Monday. As of writing, the pair was up 0.04% on the day at 0.9726.

The US and China are scheduled to sign the phase-one of the trade deal on Wednesday and the details of the agreement are expected to be released on the same day before the signing ceremony. Ahead of this critical event, major European equity indexes are posting modest gains to point out to an upbeat market mood. Furthermore, the 10-year US Treasury bond yield is up 1.5% on the day to reflect the positive sentiment, which makes it difficult for the CHF to find demand as a safe-haven.

USD recovers NFP-inspired losses

In the meantime, after closing the day in the negative territory on Friday following the disappointing labour market data from the US, the US Dollar Index gained traction on Monday and advanced to 97.50 area. There won't be any macroeconomic data releases from the US in the remainder of the day and investors are likely to keep an eye on the markets' risk perception.

Assessing the latest Nonfarm Payrolls (NFP) report, "the December labour market report shows that the labour market generally remains on a firm foundation," said Wells Fargo analysts. "Employment gains have averaged 184K per month over the past three months. Although not quite as strong as a year ago, this pace of gains is solid. The unemployment rate remains at a 50-year low, and wages continue to increase."

Technical levels to watch for