In one lineA currency pair tells you how much of the second currency is needed to buy one unit of the first.
Base currency and quote currency
EURBase
1.1000€1 = $1.10
USDQuote
In EUR/USD, EUR is the base currency and USD is the quote currency.
If EUR/USD is 1.1000, one euro is worth $1.10.
What happens when the price moves?
- If EUR/USD rises from 1.1000 to 1.1100, EUR has strengthened relative to USD.
- If EUR/USD falls from 1.1000 to 1.0900, EUR has weakened relative to USD.
The move can happen because one currency changes, the other changes, or both change at the same time.
Major, minor and exotic pairs
You will often see currency pairs grouped into three broad categories:
MajorIncludes USD and another heavily traded currency.
Minor / CrossTwo major currencies without USD.
ExoticA major currency paired with a less actively traded currency.
Major pairs usually have deeper liquidity and tighter spreads than less actively traded pairs.
One more example with USD first
Example
If USD/JPY = 148.50, then:
$1 = ¥148.50
Remember this
- First currency = base.
- Second currency = quote.
- A pair always describes a relationship.
Educational content.
This lesson is provided for general educational and informational purposes and is not personal financial or investment advice.