In the foreign exchange market, a currency pair is a price quote for the exchange rate of two different currencies.
The simultaneous purchase of one currency and the sale of another is known as forex trading.
You purchase and sell currency pairs when you trade in the forex market.
The three-letter codes for each currency in the pair are listed below.
The first two letters indicate the country’s name, while the third letter, usually the initial letter of the currency’s name, identifies the currency’s name.
The US dollar, for example, is denoted by USD, while the Canadian dollar is denoted by CAD.
You buy the US dollar by selling the Canadian dollar in the USD/CAD pair.
The base currency is the first currency listed in a currency pair, while the quote currency is the second currency listed.
The “counter currency” is another name for the quote currency.
Currency pairs are used to compare the value of two different currencies. It tells you how much of the quote currency you’ll need to buy one unit of the base currency.
A currency pair’s price is the value of one unit of the base currency in the quote currency.
The base currency for the currency “EUR/USD” is EUR, while the quote currency is USD.
If the EUR/USD exchange rate is 1.0950, one euro is worth 1.0950 US dollars.
If the euro gains value against the dollar, a single euro will be worth more dollars, raising the price of the pair.
The price of the pair will fall if the euro depreciates versus the dollar.
You can establish a long position (“buy the pair”) if you believe the base currency in a pair will strengthen against the quote currency.
You can enter a short(“sell the pair”) if you believe it will weaken.
A large list of currencies that trade against the USD may be found here.