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Understanding Forex quotes

forex advantages

 

Remember:

 

1) Foreign exchange rates are quoted in pairs
2) The first currency listes isthe Base currency
3) the value of the base currency is always 1
4) The Majors, refer to actively traded Forex currencies

5) Major Pairs reference major currencies coupled with the USD

 

Foreign Exchange Rates are quoted in pairs.

So a currency pair will be displayed in this manner: EUR/USD.

The first currency listed is referred to as the “base currency”.  The second currency listed is considered the “quote currency”.

 

 

The US dollar is the centerpiece of the Forex market and is normally considered the 'base' currency for quotes.

The quotes are expressed as a unit of $1 USD per the second currency quoted in the pair. In the "Majors" (a), for example, a quote of USD/JPY 118.363 means that one U.S. dollar is equal to 118.363 Japanese yen.

When the U.S. dollar is the base unit and a currency quote goes up, it means the dollar has appreciated in value and the other currency has weakened.

 

The three exceptions, in the Majors, to this rule are the British pound (GBP), the Australian dollar (AUD) and the Euro (EUR). In this case the dollar appears the second place, so the reasoning goes inverted. In this case the dollar appears the second place, so the reasoning goes inverted.


In these three currency pairs, where the U.S. dollar is not the base rate, a rising quote means a weakening dollar, as it now takes more U.S. dollars to equal one pound, euro or Australian dollar.

 

Currency pairs that do not involve the U.S. dollar are called cross currencies, but the premise is the same.

Major currencies: this term is in reference to the most frequently traded currencies in the world.

 

 

 

The symbols (abbreviations) for all currencies have three letters.

The first two letters denote the name of the country and third letter stands for the name of that country’s currency.

As an example, let’s look at the USD. The US stands for United States and the D stands Dollar.

It is also important to review each currencies nickname. These names will often come up in research and will be handy when communicating with other Forex traders.

 

Not to be confused with major currencies are the major currency pairs. The Major Pairs are any currency pair with USD in them. For example, the EURUSD would be considered a Major Pair.


The Major Pairs are a reference to any of the major currencies listed above when paired with the USD. For example, the EURO is considered a major currency, but when paired with the USD (EUR/USD) the quote becomes a reference to a major pair. Below you can reference seven of the major currency pairs:

 

Currency Pair Nickname
EUR/USD Fiber
GBP/USD Cable
USD/JPY Yen
USD/CHF Swissy
USD/CAD Loonie
AUD/USD Aussie
NZD/USD Kiwi

 

 

 

 

 

 

 

 

 

 

 

 

 



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