USD/CHF drops to over two-week low, eyes mid-0.9200s ahead of US NFP report

• USD/CHF drifts lower for the third straight day and drops to over a two-week low on Friday.
• Reduced bets for more aggressive rate hikes by the Fed weigh on the USD and exert pressure.
• The risk-off mood underpins the safe-haven CHF and contributes to the heavily offered tone.
• Investors now look forward to the crucial US NFP report for some meaningful opportunities.

The USD/CHF pair prolongs this week's retracement slide from the 0.9435-0.9440 supply zone and continues losing ground for the third successive day on Friday. The pair maintains its heavily offered tone heading into the North American session and is currently placed around the 0.9270-0.9265 region, or over a two-week low.

Reduced bets for a more aggressive policy tightening by the Federal Reserve (Fed) drag the US Dollar further away from a three-month high touched on Wednesday, which, in turn, is seen exerting downward pressure on the USD/CHF pair. A larger-than-expected rise in the US Weekly Jobless Claims was seen as the first sign of a softening labor market and forced investors to re-evaluate the possibility of a  jumbo 50 bps lift-off at the upcoming FOMC meeting on March 21-22. This leads to a further decline in the US Treasury bond yields and continues to weigh on the Greenback.

Apart from this, the prevalent risk-off environment - as depicted by a sea of red across the global equity markets - benefits the safe-haven Swiss Franc (CHF) and further contributes to the offered tone surrounding the USD/CHF pair. Fed Chair Jerome Powell's hawkish comments earlier this week, saying that the US central bank was prepared to quicken the pace of rate hikes to tame inflation, fueled worries about economic headwinds stemming from rising borrowing costs. Furthermore, fading hopes for a strong economic recovery in China temper investors' appetite for riskier assets.

The USD selling, meanwhile, seems to have abated, at least for the time being, as traders now look forward to the release of the closely-watched US monthly jobs report. The popularly known NFP report will provide a fresh insight into the US labor market conditions. This, along with the latest US consumer inflation figures, due next Tuesday, will influence the Fed's policy outlook, which, in turn, should drive the USD demand. Apart from this, the broader risk sentiment should help traders to determine the next leg of a directional move for the USD/CHF pair.

Technical levels to watch