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Following an intraday drop to sub-0.8700 levels during the Asian session, the USD/CHF pair receives some purchasing interest and climbs closer to last Friday's two-week high. Spot prices are currently trading near 0.8725 and appear poised to build on last week's decent rebound from the mid-0.8500s, or a new low since January 2015.

A generally bullish equity market sentiment is viewed as undermining the safe-haven Swiss Franc (CHF) and operating as a tailwind for the USD/CHF pair. Investors continue to be optimistic about the prospect of China implementing additional stimulus measures. This, along with expectations that the Federal Reserve (Fed) will soften its stance in response to signals of easing inflationary pressures, continues to support an environment favourable to risk-taking. In fact, the markets now appear to be convinced that the US central bank is nearing the conclusion of its most rapid rate-hiking cycle since the 1980s.

Nonetheless, the optimistic US GDP report published last week indicated an exceptionally resilient economy and left the door wide open for another 25 basis point rate hike in September or November. In addition, Fed Chair Jerome Powell stated that the economy and labour market must continue to contract for inflation to credibly return to the 2% target. The hawkish outlook aids the US Dollar (USD) to remain stable near a three-week high, which is viewed as an additional factor that supports the USD/CHF pair and lends credence to the bullish bias.

According to the aforementioned fundamental environment, the path of least resistance for spot prices is to rise. Consequently, any intraday decline may now be perceived as a purchasing opportunity. Before concluding that the USD/CHF pair has formed a near-term bottom, it will be prudent to await confirmation of significant follow-through buying. Traders are now focusing on the US economic calendar, which includes the issuance of the ISM Manufacturing PMI JOLTS data. Along with the broader risk sentiment, this should give the major a significant boost.

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