It takes a lot of honesty and integrity to admit ones shortcomings (other players can take a note from this guy), Younis was never much of an ODI player, if he decides to retire from ODI's then it's his decision to make. I personally don't think he should retire, once again Pakistan does not have any bench strength at all, there is no suitable replacement if younis quits (the state of Pak cricket is really pathetic, but it's true), maybe he should just give himself some time, but his decision in the end.
If you see his interview (on GEO TV), he says that after his bad performance at the world cup he felt that he didn't deserve to be captain. He further voices his fears of isolation that a captain has to face, politics from board members, hostility from media, we all saw what happened to inzimam, he was made the scapegoat for everything (from selection to teams non-performance, what was the rest of PCB doing), a captain cannot force the performance out of people, it is a very thankless job. All of this just reflects the tremendous mental and emotional pressure on players.
