USD/CHF sticks to gains below mid-0.9200s, lacks follow-through ahead of NFP

• USD/CHF regained traction on Friday and built on the overnight bounce from sub-0.9200 levels.
• The risk-on impulse undermined the safe-haven CHF and extended support amid a stronger USD.
• Hawkish Fed expectations, rising US bond yields benefitted the buck ahead of the US jobs report.

The USD/CHF pair held on to its modest intraday gains through the first half of the European session and was last seen trading near the daily high, just below the mid-0.9200s.

A combination of supporting factors assisted the USD/CHF pair to attract some buying on the last day of the week and built on the overnight bounce from sub-0.9200 levels, or a near four-week low. A generally positive risk tone undermined the safe-haven Swiss franc and acted as a tailwind amid some follow-through US dollar buying interest.

Despite growing uncertainty over Ukraine, investors turned optimistic about a possible breakthrough in the Russia-Ukraine peace negotiations. This was evident from a goodish rebound in the equity markets. This, along with hawkish Fed expectations, triggered a fresh leg up in the US Treasury bond yields and benefitted the greenback.

In fact, the markets seem convinced that the Fed would adopt a more aggressive policy stance and hike interest rates by 100 bps over the next two policy meetings to combat stubbornly high inflation. The bets were reaffirmed by Thursday's release of the US Core PCE Price Index, which rose to 5.4% YoY in February from the 5.2% previous.

From a technical perspective, bulls showed some resilience below the very important 200-day SMA. Hence, Friday's uptick could further be attributed to some technical buying. It, however, remains to be seen if the USD/CHF pair is able to capitalize on the move as the focus remains glued to the release of the closely-watched US monthly jobs data.

The popularly known NFP report, due later during the early North American session, will influence market expectations about the Fed's next policy move. This, in turn, will drive the USD demand in the near term. Apart from this, fresh developments surrounding the Russia-Ukraine saga should provide some meaningful impetus to the USD/CHF pair.

Technical levels to watch