What is a currency pair?
A currency pair is a quote showing the value of one currency against another. The first currency is the base currency and the second is the quote currency. The price tells you how many units of the quote currency one unit of the base currency is worth. If EUR/USD is 1.0850, one euro costs 1.0850 US dollars. When you buy a pair, you buy the base currency and sell the quote currency at the same time.
Every forex trade involves two currencies because you are always exchanging one for the other. That is why forex prices are always shown as pairs rather than as a single price.
How to read a currency pair
Currencies use three-letter ISO codes. The first two letters usually refer to the country and the third to the currency, so USD is the US dollar, GBP the British pound and JPY the Japanese yen. The euro is EUR.
| Quote | Base currency | Quote currency | What it means |
|---|---|---|---|
| EUR/USD 1.0850 | Euro | US dollar | 1 euro = 1.0850 dollars |
| GBP/USD 1.2700 | British pound | US dollar | 1 pound = 1.2700 dollars |
| USD/JPY 150.00 | US dollar | Japanese yen | 1 dollar = 150 yen |
| USD/CAD 1.3600 | US dollar | Canadian dollar | 1 dollar = 1.3600 Canadian dollars |
The prices above are examples, not current rates. Some platforms drop the slash and show EURUSD, which means the same thing.
Buying and selling a pair
- Buy (go long): you expect the base currency to strengthen against the quote currency, so the price rises.
- Sell (go short): you expect the base currency to weaken against the quote currency, so the price falls.
Because a pair is a ratio, its price can rise because the base currency strengthens, because the quote currency weakens, or both. If US data disappoints and the dollar weakens broadly, EUR/USD tends to rise while USD/JPY tends to fall, even though nothing changed in Europe or Japan.
Each quote also has a bid and an ask price, and the gap between them is your trading cost. See what spread means in forex for details.
Types of currency pairs
Major pairs
The majors are the most traded pairs, and each includes the US dollar against another large, liquid currency. The seven pairs usually listed as majors are:
- EUR/USD (euro / US dollar)
- USD/JPY (US dollar / Japanese yen)
- GBP/USD (British pound / US dollar)
- USD/CHF (US dollar / Swiss franc)
- AUD/USD (Australian dollar / US dollar)
- USD/CAD (US dollar / Canadian dollar)
- NZD/USD (New Zealand dollar / US dollar)
Majors usually have the deepest liquidity and the tightest spreads. EUR/USD is the most traded currency pair in the world, and the US dollar is on one side of the large majority of all forex trades. Brokers and regulators may define "major" slightly differently for leverage purposes, so check your broker's list.
Minor pairs (crosses)
Minor pairs, or crosses, pair two major currencies without the US dollar. Examples include EUR/GBP, EUR/JPY, GBP/JPY, AUD/JPY and EUR/CHF. They are still widely traded but usually have somewhat wider spreads than the majors. Crosses involving the euro are sometimes called euro crosses, and those involving the yen yen crosses.
Exotic pairs
Exotic pairs combine a major currency with the currency of a smaller or emerging economy, for example USD/TRY (Turkish lira), USD/ZAR (South African rand), USD/MXN (Mexican peso) or EUR/PLN (Polish zloty). Exotics often have much wider spreads, lower liquidity, larger price gaps and higher overnight financing costs. Retail leverage limits on them are also lower. Most beginners are better served learning on the majors first.
Worked example: trading a currency pair
Suppose you buy 0.10 lots (10,000 units) of EUR/USD at 1.0850, expecting the euro to rise against the dollar.
- One pip on EUR/USD is 0.0001. For 0.10 lots, each pip is worth 0.0001 x 10,000 = $1.
- If you close at 1.0890, price has risen 40 pips, so you make 40 x $1 = $40 before costs.
- If you close at 1.0820 instead, price has fallen 30 pips, so you lose 30 x $1 = $30 before costs.
Now take USD/JPY. Buying 0.10 lots at 150.00 and closing at 150.50 is a 50-pip gain, because a pip on yen pairs is 0.01. Each pip is worth 0.01 x 10,000 = 100 yen, so the gain is 5,000 yen, which is about 5,000 / 150.50 = $33.22 for a USD account. Our guide to pips and pip value covers these conversions, and our lot size guide explains position sizes. You can also check any trade with the profit calculator.
What moves currency pairs?
Currency prices reflect how the market compares two economies. Common drivers include:
- Interest rates and central bank policy. Expectations of higher rates in one country often support its currency.
- Economic data. Inflation, employment, growth and trade figures shift those expectations.
- Risk sentiment. In periods of stress, traders often move toward currencies seen as safe havens, such as the US dollar, Japanese yen and Swiss franc.
- Commodity prices. The Australian dollar, New Zealand dollar and Canadian dollar are often called commodity currencies because their economies have large commodity exports.
- Politics and unexpected events. Elections, policy changes and geopolitical news can cause sudden moves.
Correlation between pairs
Many pairs share a currency, so they often move together. EUR/USD and GBP/USD frequently move in the same direction, while EUR/USD and USD/CHF often move in opposite directions. Opening the same trade on several correlated pairs can multiply your risk without you noticing. The position sizing and portfolio risk lesson explains how to account for this.
Choosing which pairs to trade
- Start with one or two majors so you can learn how they behave.
- Match pairs to the hours you can trade. Our guide to forex market hours shows when each region's pairs are most active.
- Check the total trading cost on each pair, especially on crosses and exotics.
- Watch for correlation so you do not double up on the same idea.
Trading currency pairs involves substantial risk of loss, and leveraged trading can magnify losses. The examples here are for education only and are not financial advice. Read our risk disclaimer.