USD/CHF trades just below multi-week high, around 0.8765 area ahead of the NFP report

• USD/CHF regains some positive traction and reverses a major part of the overnight slide.
• A positive risk tone undermines the safe-haven CHF and lends support amid a bullish USD.
• Traders keenly await the crucial US NFP report before placing aggressive directional bets.

The USD/CHF pair attracts some dip-buying near the 0.8730 area on Friday and builds on its steady intraday ascent through the early part of the European session. Spot prices climb to the 0.8760-0.8765 zone, or a fresh daily high in the last hour, reversing a major part of the previous day's slide from the 0.8800 mark, or the vicinity of a three-week high touched on Wednesday.

A generally positive tone around the equity markets is seen undermining the safe-haven Swiss Franc (CHF), which, along with a modest US Dollar (USD) uptick, is seen acting as a tailwind for the USD/CHF pair. In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, trades just below its highest level since July 7 and remains well supported by the prospects for further policy tightening by the Federal Reserve (Fed).

Market participants now seem convinced that the US central bank will have enough headroom to raise interest rates further. The expectations were reaffirmed by the incoming US macro data, which continues to point to a resilient economy and should allow the Fed to stick to its hawkish stance. This keeps the yield on the benchmark 10-year US government bond elevated just below its highest level since October 2022 and lends support to the Greenback.

The USD/CHF pair, however, still needs to break through and find acceptance above the 0.8800 mark, which coincides with the 200-period Simple Moving Average (SMA) on the 4-hour chart, before bulls start positioning for any further appreciating move. Spot prices might then prolong the recent goodish recovery over around 250 pips witnessed over the past week or so, from mid-0.8500s, or the lowest level since January 2015.

Market participants now look to Friday's key release of the closely-watched US monthly employment details, due later during the early North American session. The popularly known NFP report will influence market expectations about the Fed's future rate hike path, which, in turn, should play a key role in driving the USD demand. Apart from this, the broader risk sentiment might provide some impetus to the USD/CHF pair on the last day of the week.

Technical levels to watch