The Market
Module 2 — Currency Pairs
A currency pair is a price quote for one currency measured in another. EURUSD 1.0850 means one euro is worth 1.0850 US dollars. When the number rises, the first currency is strengthening. When it falls, the first currency is weakening.
- EURUSD — euro against the US dollar
- GBPUSD — British pound against the US dollar
- USDJPY — US dollar against the Japanese yen
- XAUUSD — gold against the US dollar (traded like a pair, covered in its own course)
A pair only ever moves for one of two reasons: the first currency changed in value, or the second one did. Traders who forget this end up confused when a pair falls on good news — the other side of the pair simply moved more.
Key concepts
- Pairs are relative prices
- The first currency rises when the quote rises
- Both sides can influence price
Practical example
GBPUSD at 1.2500 means one pound is valued at 1.25 US dollars.
Common mistake
Explaining a move using only the first currency while ignoring the quote currency.
Knowledge check
Check your understanding
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