USD/CHF remains below 50-day SMA barrier near 0.8540 ahead of US NFP

• USD/CHF is consolidating in a range below the 50-day SMA as traders await the US NFP report.
• A modest USD pullback from a one-month high is seen as a key factor limiting upside.
• Low bets on a 50bps Fed rate cut in November provide support to the USD and the pair.

The USD/CHF pair is reversing an intraday decline to the psychological 0.8500 level and climbing back closer to a three-week peak in the first half of the European session on Friday. However, spot prices remain below the 50-day simple moving average (SMA), warranting some caution for bullish traders ahead of the release of monthly US employment details.

The well-known US Nonfarm Payrolls (NFP) report is expected to show the economy added 140,000 jobs in September, down slightly from 142,000 the previous month, and the unemployment rate held steady at 4.2%. Apart from that, average hourly earnings could provide clues about the size of the Federal Reserve’s (Fed) interest rate cut in November. This, in turn, will play a key role in stimulating demand for US dollars (USD) and determining the next stage of a directional move for the USD/CHF pair.

Ahead of the key data, some repositioning trades are pulling the USD index (DXY), which tracks the greenback against a basket of currencies, off Thursday’s one-month high. This, in turn, acts as a headwind for spot prices amid a further escalation in geopolitical tensions in the Middle East. That said, bearish bets on an outsized rate cut by the Federal Reserve (Fed) in November are limiting USD losses and supporting the outlook for a further appreciation move in the USD/CHF pair.

However, spot prices look poised for strong weekly gains, although they remain limited in a multi-week trading range. This makes it prudent to wait for sustained resistance and acceptance above the 50-day SMA hurdle around the 0.8540 region before positioning for an extension of this week’s good rebound from levels below 0.8400 or at the lower end of the short-term range. .