GBP/USD recovers and returns around 1.3025

• The British Pound will end the week on a negative note, down 0.83%.
• The US dollar index broke above the 100 level for the first time since May 2020.
• GBP/USD Price Forecast: The failure at 1.3200 exacerbated the drop towards 1.3000, which once broken, would send the pair towards 1.2855.

The British Pound collapsed at one point below 1.3000 early in the American session, hitting a fresh 1-1/2 year low at 1.2982. However, sterling bulls rallied the figure amid a mixed market mood, with European stocks gaining while US counterparts fluctuated. At the time of writing, the GBP/USD trades at 1.3020.

Mixed Market Sentiment, Rising US Treasury Yields and a Strong Dollar Weigh on the Pound

The war between Russia and Ukraine continues, although it appears to be ignored in Friday’s session. Meanwhile, US Treasury yields are soaring, with the 10-year US Treasury yield rising six basis points to 2.728%, supporting the dollar. The US Dollar Index, a gauge of the dollar’s value against a basket of its peers, rose above 100, growing 0.29%, to 100,026, for the first time since May 2020.

Fed members made remarks Thursday, led by St. Louis Fed President James Bullard. He said the Fed’s policy rate was too low, at 300 basis points. Bullard added that the Federal Reserve is not that far behind and expects the Federal Funds Rate (FFR) to end the year around 3.5%.

Meanwhile, Chicago Fed President Charles Evans said the Fed will likely achieve a neutral setting by the end of this year or early next year.

The lack of a docket for the UK economy left GBP/USD traders adrift on US economic data. For its part, the US docket featured February Wholesale Inventories , which were located at 2.5% m/m, higher than the estimated 2.1%.

GBP/USD Price Forecast: Technical Outlook

GBP/USD is further consolidating its downside bias as its failure to hold on to 1.3200 opened the door for a retest of the 1.3000 figure. It is worth noting that despite the GBP/USD’s sharp decline towards new 17-month lows, the RSI is at 33.81 within bearish territory, but with enough room to spare, so another bearish extension should not be discounted.

That said, the first support level for GBP/USD on its way down would be 1.3000. A break of the latter would expose the November 2020 lows near 1.2855, followed by the September 2020 lows around 1.2675.

Technical levels