EUR/USD and Gold / Silver Ratios: Levels, Ranges, Targets




The exchange rate free float in the 1970’s went from currency pairs priced to Gold to interest rates. The 1970’s had a rough time to price currency pairs to interest rates because a brand new market was created and not known since the 1930’s. Yet in the 1930’s markets were still trading the various legacy Gold standard periods. How does markets just switch from 300 years of Gold Standard practices from its 1600’s beginnings. The next question was Gold Standards was a term like volatility or many of today’s generalized terms without proper definition or understanding, overbought / oversold, consolidation. Millions of general terms exist without definition.

Gold Standards are one aspect to the story as the world was and remains evenly divided between Gold Standard and Silver Standard currency pairs. Asia for example lives by and prices currency pairs to Silver. Mexico is priced to Silver while Europe is priced to Gold. Few currency pairs are priced as hybrids. JPY / USD as 0.008853 and MXN/USD as 0.05640 are classic Silver currency arrangements.

The trading methodology to tie the world together was Gold / Silver Ratios. High Gold Ratios translates as sell Europe currencies and buy Asia or vice versa. Current 77.0 Gold / Silver Ratios informs Europe currencies are far to high while Silver currency pairs far to low. Gold / Silver Ratios offer standard parameters against standard calculations and this situation won’t ever chamge as long as markets exist. Further, central bank’s ability to manipulate Gold / Silver Ratios is absent.

Bid and ask spreads were the main problem in the 1970’s but then the world tied together trades by Libor. Interest rate formulas like Gold / Silver Ratios are accompanied by set formulas inside set parameters and this calculation nor the parameters won’t change as long as markets trade.

While Gold / Silver Ratios and interest rates remain as the only trade vehicles to underlying exchange rate prices, books nor academic papers exist to understand the how part to the trade. Citi bank and the old Shearson Lehman manuals offer little to no hope to learn but both are good starts. Only 1 website in the world offers any resemblance to today’s interest rates.

The learn part must be accomplished by raw research, time, energy and desire. After 45 years of the free float, exchange rate knowledge remains not only sparse but interest rates and Gold / Silver Ratios knowledge is equally limited. Both beat any Statistic formulas on the planet and the calculations are far easier. Yet also at this stage of the game, the world isn’t interested in exchange rate, interest rate or Gold / Silver knowledge. Most published information is wrong or elementary anyway.

EUR/USD at 1.1389 and EUR/JPY at 128.68 sits at the day’s bottom. EUR/USD next stop is located at 1.1343 and 128.16 for EUR/JPY. EUR/USD remains overbought and heading lower.

AUD/USD and NZD/USD must break below at AUD 0.7730 then 0.7718 while NZD/USD must break 0.7325 then 0.7293 and 0.7262. AUD/USD big line break remains 0.7790 while NZD 0.7450.

Brian Twomey


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