• Germany bans naked short selling in shares of 10 financial institutions; CDS on European government bonds and some European government bonds
  • EU’s Rehn: Would like to tighten budget rules without amending EU Treaty
  • US April PPI falls 0.1/+0.2% ex-food and energy
  • US housing starts rise 5.8% in April, permits fall 12%; home-buyer credits expire
  • Dax up 1.5%, CAC-40 up 2%; S&P 500 down 1.4%
  • Oil tumbles with EUR, ends at 2010 low of $69.37; gold edges to $1220

It was a relatively quiet session in the US today, for a while. The euro opened firm amid reports of significant short-covering by leveraged money and buying from Middle Eastern sovereign wealth funds.

EUR/USD was unable to overcome 1.2455 resistance during the US morning, prompting intraday longs to book profits. Prices started to head lower with US equities at midday and they accelerated rapidly once talk of a German ban on short selling began to circulate. With the markets seemingly attempting to put in a bottom on their own, the panic move by German authorities soon had the market wondering “what do the authorities know that I don’t?”

What ever modest confidence the markets had managed to generate Monday/Tuesday was lost and prices soon spiraled below 1.2235 lows set early Monday. We reached 1.2161 before steadying. The 50% retracement of the 0.8225/1.6138 life-of-euro range is key support for the euro near-term.

USD/JPY was forced lower by EUR/GBP sales as risk aversion reared its ugly head again. Traders noted real-money sales from US accounts as well as Japanese pro-desk selling into relative early strength. We slipped as low as 92.10. Highs ere 92.93 after the upbeat economic data early in the session.

GBP/USD was dragged lower by the euro’s plunge, down to 1.4312 level. .4257, Monday’s lows are next support for the pound.EUR/GBP fell back to 0.8502.

EUR/CHF saw some rare intraday strength today, rising to 1.4045 on short-covering. That did not last long, thanks to the German short-selling news. The SNB was forced to buy billions more EUR/CHF today. Stops below 1.4000 grow larger by the hour…

Commodity currencies were taken out and shot this afternoon with AUD leading the way. 0.8625 was the afternoon low. February’s 0.8575/80 lows are the next target for the bears. USD/CAD firmed within recent ranges but again struggled to maintain levels above 1.04. Deutsche Bank recommended shorts today with stops in the 1.0450 area for a decline to 0.9800. Their timing could have been better…We end at 1.0385.