Lesson 6 – What is a currency pair in forex?
So, this is the first trip down the jargon alley of the forex world. I may have mentioned currency pairs in the introductory articles of this course.
However, this is where I explain what they are.
When you look at the tickers on any forex broker or website, you will see currencies in pairs.
They look like this:
You’ll see two currencies written together. An example is the Euro and the United States Dollar written as EURUSD.
But what does this mean.
As we can see, the EURUSD is trading at 1.1799. In simple terms, this is telling us how much of the second currency we can buy with the first currency.
In this case, we can buy 1.1799 USD with 1 EUR.
Now lets assume that the european market strengthened due to some positive news about the economy, lets say their unemployment rate has gone down.
The euro strengthens. And the Rate goes up to 1.1900 EURUSD
This means you can now buy 1.19 USD with your 1 EUR.
The first currency is a pair is called the quote currency, with the second currency being the base.
The same logic applies to any currency pair on any forex market.