Currency pair

Currency pair

A currency pair is the price of one currency in relation to another. Currency pairs are traded on the foreign exchange market.

Currencies are always traded in pairs, so if you buy one currency you will automatically be selling another and vice versa.

For example, if you decide to buy EUR/USD, you purchase euros and pay for them with US dollars. If you close your position, you sell your euros and automatically purchase back the US dollars.

The first currency in a currency pair is called the base currency. The second currency is called the quote currency.

Trading currency pairs

To start learning how to trade currencies, we recommend our forex beginner strategy:

At tradimo, we also have a dedicated forum on currency trading:

What are the major currency pairs?

The major currency pairs all contain the US dollar and are the most traded pairs on the forex market. For this reason they are very liquid.

Shortcut currencies FX jargon

Shortcut CurrenciesFX jargon
EUR/USDeuro/US dollar euro
USD/JPYUS dollar/Japanese yen yen
GBP/USDpound/US dollar Cable
USD/CHFUS dollar/Swiss franc Swissy
USD/CADUS dollar/Canadian dollar Loonie
AUD/USDAustralian dollar/US dollar Aussie
NZD/USDNew Zealand dollar/US dollar Kiwi

Major cross currency pairs

When a pair contains two of the major currencies, but not the USD, it is considered to be a cross currency pair. The most commonly traded cross currency pairs are a combination of EUR, JPY and GBP.

Euro crosses

Shortcut currencies

ShortcutCurrencies
EUR/CHFeuro/Swiss franc
EUR/GBP euro/pound sterling
EUR/CADeuro/Canadian dollar
EUR/AUDeuro/Australian dollar
EUR/NZD euro/New Zealand dollar

Yen crosses

ShortcutCurrencies
EUR/JPYeuro/Japanese yen
GBP/JPYPound sterling/Japanese yen
CHF/JPYSwiss franc/Japanese yen
CAD/JPYCanadian dollar/Japanese yen
AUD/JPYAustralian dollar/Japanese yen
NZD/JPYNew Zealand dollar/Japanese yen

Pound crosses

ShortcutCurrencies
GBP/CHFpound sterling/Swiss franc
GBP/AUDpound sterling/Australian dollar
GBP/CADpound sterling/Canadian dollar
GBP/NZDpound sterling/New Zealand dollar

Other crosses

ShortcutCurrencies
AUD/CHFAustralian dollar/Swiss franc
AUD/CADAustralian dollar/Canadian dollar
AUD/NZDAustralian dollar/New Zealand dollar
CAD/CHFCanadian dollar/Swiss franc
NZD/CHFNew Zealand dollar/Swiss franc
NZD/CADNew Zealand dollar/Canadian dollar

The exotic pairs

Exotic pairs are the combination between one major currency and another currency that is not a major. The major currency is usually paired with a currency from an emerging economy, such as Brazil, Mexico, India or South Africa, or a smaller, less economically strong country, such as the Czech Republic or Norway.

They are not as frequently traded as major or cross pairs, so the broker could charge a wider spread.

Examples of exotic pairs that are usually offered by brokers:

Shortcut currencies

ShortcutCurrencies
USD/HKDUS dollar/Hong Kong dollar
USD/SGDUS dollar/Singapore dollar
USD/ZARUS dollar/South African rand
USD/THBUS dollar/Thailand baht
USD/MXNUS dollar/Mexican peso
USD/DKKUS dollar/Danish krone
USD/SEKUS dollar/Swedish krone
USD/NOKUS dollar/Norwegian krone

Further reading

To learn more about the economic impact on currency pairs, visit our lesson on currency correlation.

You can also visit the forum to discuss how currency pairs are trading in the current market conditions:

  • Hi,
    Is that the major currency pairs are most suitable for trending strategy. For example, Ten Bar Breakout Strategy.
    Thanks.
  • Hi JHTAN,
    USD and JPY crosses are the most liquid and most suitable for trend trading. Some sterling crosses: GBPAUD and GBPNZD also very volatile. What you generally have to avoid (for trend trading) is currencies of two countries whose economy is greatly related, such as EURCHF, EURGBP etc. Regards.
    Peter
  • Hi Peter,
    In the strategy tester report. EUR/GBP, EUR/JPY, USD/JPY and USD/CAD show bad result.
    So, is that mean we should avoid these currencies for trend trading?
    Thanks.
  • Hi JHTAN,
    For that particular strategy for that particular time period it showed bad results. But that might change in the future. That is why we are trying to teach strategies not just give them out, because it is important that you learn to identify market conditions in which a strategy is likely to fail or work. By no means does it entail that those currencies cannot be used for trend trading. Perhaps EURGBP is not ideal but the rest of them are excellent trending pairs. Regards.
    Peter
  • Okay, I think we better don't trade these currencies using the ten bar breakout strategy because it is not doing well in the past. Is that make sense?
  • Hi JHTAN,
    It is one option to abandon those pairs. Another and better one is to find out why the strategy lost money on those pairs. What sort of market conditions caused the heavy losses? Or was it the money management? For example : it is possible that these pairs would have made money but maybe the general rule to trail stops was too aggressive for those conditions and you were stopped out before the move really took off, thus leaving you with tiny wins and relatively bigger losses. Maybe if you trail less aggressively you gain more... I would definitely investigate. Regards.
    Peter
  • Hi Peter,
    'USD and JPY crosses are the most liquid and most suitable for trend trading.'
    Why do you say that the most liquid is most suitable for trend trading?
    Thanks.
  • Hi JHTAN,
    It is just a fact. You can look up on the internet that more than 90% of currency transactions involve either the USD or the JPY. Regards.
    Peter
  • May I conclude that high liquid then it is trending and low liquid then it is ranging?
  • Yes that's a fair statement.

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