Currency Pair

A currency pair is the quotation of two currencies against each other. You can't trade a single currency in isolation in forex — it's always relative. EUR/USD, GBP/JPY, AUD/NZD are all currency pairs. The first currency is the base, the second is the quote, and the price tells you how much of the quote you need for one unit of the base.

Currency pairs are categorized into three groups: majors (all involving USD), minors or crosses (major currencies without USD), and exotics (a major paired with an emerging market currency). Each category has different characteristics — majors are the most liquid and cheapest to trade, while exotics can have spreads 10-20 times wider.

The correlation between pairs is something many traders overlook. EUR/USD and GBP/USD tend to move in similar directions (positive correlation), while EUR/USD and USD/CHF often move in opposite directions (negative correlation). Understanding these relationships helps with diversification and avoiding unintended concentration of risk.