Risk appetite ran to the exits with the AUD, NZD and SEK being hit the hardest. In this environment we're keeping an eye on the SEK as the small nation remains quite vulnerable to shifts in the global economy. USD, JPY and Gold continue to be supported due to their safe haven appeal. The rest of today's news grossly centers around Germany. The announced German suspension of naked short selling on EU bonds, credit-default swaps and key banking stocks through Q1 2011 shook risk sentiment and precipitated a sell-off in Asia. The rapid sell off in the Euro through the 1.22 level signals that confidence in the currency is at an all-time low. It must be stressed that the announcement was made solely by Germany and not EU finance ministers. While we suspect other EU nations to follow, the move demonstrates to the market that the EU is just not unified, further undermining support for the Euro. As we've seen before, one EU nation can effectively shape policy unilaterally. The EU's modus operandi of tossing grenades into the market and gauging the reaction remains in effect. Later today, German Chancellor Merkel will comment on the ban and perhaps cite the move's rationale. Until Merkel lends some insight into the step, the reason for the unilateral action by Germany remains unclear. The ban takes away the most effective vehicle for investors to protect themselves from sovereign debt defaults. The two most logical motives could be to curb the negative effects of speculators creating unnecessary volatility in the marketplace or to politically position the bailout in a more favorable light. Our suspicion is the latter - as the responsibility of speculative activity for Europe's problems is questionable. Merkel must make the case to Germany and German politicians that the $1 trillion bailout is critical to saving the Euro and that the Euro is critical to sustaining the EU. In order for the bailout to pass, it must satisfy the nation's constitutional requirements for bailout legitimacy. The German Constitutional Court will rule on the legitimacy later this week and their decision hinges on the Lisbon Treaty's exceptional occurrences beyond its control clause. To pass, the crisis must be painted in a way that traces its beginnings to events outside of Greece - therefore pinning blame on naked short-sellers and speculators could help sell that story. However, if the court does rule that Greece's problems are homemade, the bailout would be a breach of the Lisbon Treaty and thus illegal. Should this come to pass, the consequences for the Euro would be punishing. For the EURUSD, the bearish trend will continue to a new 4 year low and any rallies above 1.2250 will face significant resistance. We are currently looking to a bearish flag pattern in play on the hourly chart, looking to a 1.2000 target in the coming days.