The dollar appears to have bottomed as reflected in topping action of the EUR/USD. A monstrous bull run occurred in the pair from mid August 2007 to mid April 2008 where the pair struck 1.6020. Remember, the higher the EUR/USD goes the weaker the dollar and the lower it goes the stronger.

A series of rate cuts and other fundamental economic issues led to the collapsing dollar, however it appears to me that the top is in for the EUR/USD and more downside is imminent.

There are several technical and fundamental reasons for my thoughts here. First the Bank of England voted to keep the interest rate unchanged at 5% on inflation concerns. Inflation is presently at 2.5% which is high above the target rate of 2%; this is potentially a pilot fish for interest rate freezes across the board in Europe.

The economy in the Euro Zone is showing signs of finally slowing with retail sales missing consensus numbers and falling .04%. German factory orders dropped 0.6% weighing on the Euro but correspondingly being bullish for the dollar.

Technically it appears the trend has changed in the EUR/USD. When I trade Forex, I keep things as simple as possible. Applying very basic technical analysis to the daily chart of the EUR/USD several observations confirm trend change.

First and foremost, price has dropped onto the downside of the 20 period SMA - this does not mean the trend has changed; however, it is a must to occur for the trend to have changed.

The Bollinger Bands are spreading wide on the daily chart indicating increased daily volatility with price riding down on the lower band. I interpret this as indicating increased momentum on the downside for the pair. 1.5333 appears to be minor support; I have placed an order to sell the pair at 1.5323 and will be shorting if this level is hit.

This is a longer-term trade (hopefully!) with stops at 1.5407 and a target of 1.4577.

See the chart below for an illustration.

It's important to keep this in mind when trading Forex. Due to the huge leverage, it is an unforgivable market - even Soros doesn't have enough capital to fight the trend for long.

Therefore, honor thy stops!

Dave Goodboy is Vice President of Marketing for a New York City based multi-strategy fund.