GBP/USD Forecast: Pound to extend recovery as long as 1.3000 holds

• GBP/USD has managed to recover modestly after dipping below 1.3000.
• Cautious market mood is making it hard for GBP/USD to gain traction.
• Technical outlook remains bearish but sellers could lose interest if 1.3000 support holds.

GBP/USD has staged a rebound after having declined below 1.3000 in the late Asian session on Monday. In case risk flows start to dominate the financial markets, the pair could extend its correction in the short term.

Rising US Treasury bond yields provided a boost to the greenback at the beginning of the week. The US Dollar Index (DXY), which rose more than 1% amid the Fed's aggressively hawkish stance last week, edged higher earlier in the day. With the market mood improving modestly in the European morning, however, the DXY turned negative on the day.

Nevertheless, the UK's FTSE Index is still down 0.3% and US stock futures indexes are losing between 0.1% and 0.5%, pointing to a cautious sentiment.  

Earlier in the day, the UK's Ministry of Defence said that Russia's shelling had continued in the Donetsk and Luhansk regions in eastern Ukraine over the weekend. The intelligence update also noted that Russia's reliance on unguided bombs was greatly increasing the risk of further civilian casualties.

The lack of progress toward a ceasefire between Russia and Ukraine could delay a relief rally in markets and cause GBP/USD's recovery attempts to remain as technical corrections.

The US economic docket will not be featuring any high-impact data releases on Monday and the risk perception should continue to impact GBP/USD's price action. Meanwhile, the data published by the UK's Office for National Statistics revealed on Monday that the British economy grew by 0.1% on a monthly basis in February. Although this print missed analysts' forecast of 0.3%, the market reaction was largely muted.

GBP/USD Technical Analysis

On the four-hour chart, the Relative Strength Index (RSI) indicator stays below 40, highlighting a lack of buyers' interest. Moreover, the descending trend line coming from late March stays intact.

Interim resistance for GBP/USD seems to have formed at 1.3040 (static level) ahead of 1.3060 (static level, descending trend line). With a four-hour close above the latter, the pair could target 1.3100 (50-period SMA, static level).

On the downside, key support is located at 1.3000 (psychological level). In case the pair drops below that level and starts using it as resistance, additional losses toward 1.2980 (April 8 low) and 1.2900 (psychological level) could be witnessed.