June 11 (Reuters) - With GBP/USD's daily and weekly charts flashing warning signs, this week's close is poised to be a make-or-break moment for sterling bulls.

Falling daily tops, sterling having peaked at 1.3616 on June 5, hint at the beginning of a direction change. GBP/USD has already met a minimum correction level, taken off the 1.3140-1.3616 rally, at 1.3504. The 38.2% Fibonacci level of that move provides a bear target at 1.3434 and the critical 50% retracement and potential tipping point is at 1.3378.

The weekly chart is poised to issue a significant warning for sterling, indicating a potential course change. While it is only Wednesday — and thus too early to confirm a key reversal signal — should GBP/USD close Friday's session below 1.3460 (last week's opening level), a bearish engulfing candlestick pattern would materialize. This powerful pattern occurs when the current candle's real body (the range between open and close) completely envelops the previous period's real body. The bearish signal would be further strengthened if sterling also closed below the May 30 low of 1.3417.

The weekly Relative Strength Indicator has begun to correct lower, having peaked above the 70.00 overbought value and 14-week positive momentum is beginning to fade.

If the GBP/USD reversal signals are confirmed, the 1.3140 mid-May low point would provide a target. It would take a move above 1.3616, the June 5 high, to negate the current bear risk.
GBP/USD weekly candle chart:


GBP/USD daily candle chart:

(Peter Stoneham is a Reuters market analyst. The views expressed are his own)