By Saskia, Forex Trader & Coach at FXC Academy | Last updated: March 2026

• Currency pairs show the value of one currency relative to another
• The first currency is called the base currency
• The second currency is the quote currency
• Prices move based on economic, political, and market factors
• All Forex trades involve buying one currency and selling another

Currency pairs are the quotation of one currency against another, showing how much of one currency is needed to buy another.

In Forex trading, currencies are always traded in pairs, meaning you are simultaneously buying one currency and selling another.

For example:

• EUR/USD = 1.10
  This means 1 Euro equals 1.10 US Dollars

Understanding currency pairs is fundamental to understanding how the Forex market works.

Every currency pair consists of two parts:

Base Currency

The first currency in the pair
Example: EUR in EUR/USD

Quote Currency

The second currency in the pair
Example: USD in EUR/USD

The price tells you how much of the quote currency is needed to buy one unit of the base currency.

Example:

• EUR/USD = 1.10
• You need 1.10 USD to buy 1 EUR

This structure applies to all currency pairs.

Currency pairs are generally grouped into three categories:

The most traded pairs globally, typically involving the US Dollar:

• EUR/USD
• GBP/USD
• USD/JPY

These pairs tend to have higher liquidity and tighter spreads.

Pairs that do not include the US Dollar but involve major economies:

• EUR/GBP
• EUR/AUD

They may have slightly lower liquidity compared to majors.

Pairs that include one major currency and one from a smaller or emerging economy:

• USD/TRY
• EUR/ZAR

These pairs can experience higher volatility and wider spreads.

Currency prices change based on supply and demand in the market.

Key factors include:

• economic data (e.g. inflation, employment)
• interest rates set by central banks
• geopolitical developments
• market sentiment

For example:

• Strong economic data in the US may increase demand for USD
• This could cause EUR/USD to fall if the dollar strengthens

Financial regulators such as the Financial Conduct Authority (FCA) highlight that market movements can be unpredictable, and prices may change rapidly due to external events.

When trading Forex, you are always taking one of two positions:

• Buying (going long) → expecting the base currency to rise
• Selling (going short) → expecting the base currency to fall

Example:

• If you believe EUR will strengthen → you buy EUR/USD
• If you believe EUR will weaken → you sell EUR/USD

This dual structure is what makes Forex trading unique compared to some other markets.

Let’s simplify a typical scenario:

• EUR/USD = 1.10
• You expect EUR to strengthen

If the price moves to:

• 1.12 → the Euro has increased in value relative to the Dollar

If the price moves to:

• 1.08 → the Euro has weakened

This illustrates how price movement reflects the relationship between two economies.

Some common misunderstandings include:

• thinking currencies move independently (they always move relative to another)
• not understanding base vs quote currency
• ignoring economic factors that influence currencies

Building a clear understanding of these basics is an important step in developing trading knowledge.

Within structured learning environments such as FXC Academy, currency pairs are introduced alongside concepts like market structure, leverage, and risk management to provide a more complete understanding of how trading works.

For a deeper introduction, you can explore the Forex Blog.

FXC Academy is a Forex education platform that provides guides, courses, and learning resources designed to help traders understand currency markets, trading strategies, and risk management. Our educational content supports traders at different stages of their journey, from beginners learning the fundamentals to more experienced traders refining their trading knowledge.

Risk Warning
Forex trading involves significant risk and may not be suitable for all investors. You could lose all of your invested capital. This content is for educational purposes only and does not constitute financial advice.