Currency Pairs Explained: Base, Quote, Majors, Crosses and Exotics

A currency pair shows the price of one currency in terms of another: in EUR/USD = 1.1000, one euro (the base currency) costs 1.10 US dollars (the quote currency). When you buy a pair you buy the base and sell the quote; when you sell it you do the reverse. Pairs are grouped into majors (with the US dollar), crosses (two other major currencies) and exotics (with an emerging-market currency).

Reading a quote

Every currency has a three-letter code set by the international standard ISO 4217: USD (US dollar), EUR (euro), JPY (Japanese yen), GBP (British pound), CHF (Swiss franc), AUD (Australian dollar), NZD (New Zealand dollar), CAD (Canadian dollar). The Pakistani rupee is PKR.

A pair is written BASE/QUOTE, sometimes without the slash (EURUSD):

• Base currency: the first one. It is always one unit.
• Quote currency: the second one. The price is how much of it buys one unit of the base.

Quote	Meaning
EUR/USD 1.1000	1 euro = 1.1000 US dollars
USD/JPY 150.00	1 US dollar = 150.00 yen
GBP/USD 1.3000	1 pound = 1.3000 US dollars
USD/CHF 0.8000	1 US dollar = 0.8000 Swiss francs

When the price rises, the base currency is strengthening against the quote. When it falls, the base is weakening. So if USD/JPY goes from 150.00 to 152.00, the dollar strengthened (it now buys more yen), and the yen weakened.

Long and short

• Long (buy) EUR/USD = long euros, short dollars.
• Short (sell) EUR/USD = short euros, long dollars.

You never need to own euros to sell EUR/USD. With a broker you simply open a sell position, and your profit or loss is settled in your account currency. This symmetry is why forex traders think in terms of two currencies at once: every view on the euro is also a view on whatever it is paired with.

Why EUR/USD and not USD/EUR?

The market follows a long-standing order of priority for which currency comes first: EUR, then GBP, AUD, NZD, USD, CAD, CHF, JPY. The higher-ranked currency is the base. That is why we write EUR/USD, GBP/USD and AUD/USD, but USD/CAD, USD/CHF and USD/JPY. Remember it, because it decides whether "price up" means the dollar is stronger or weaker:

• In EUR/USD, GBP/USD, AUD/USD and NZD/USD, price up = dollar weaker.
• In USD/JPY, USD/CHF and USD/CAD, price up = dollar stronger.

The majors

The majors are the seven most traded pairs, each with the US dollar on one side:

Pair	Common nickname
EUR/USD	"Fiber"
USD/JPY	Usually just "dollar-yen"
GBP/USD	"Cable"
USD/CHF	"Swissie"
AUD/USD	"Aussie"
USD/CAD	"Loonie"
NZD/USD	"Kiwi"

They have the deepest liquidity and usually the tightest spreads. EUR/USD alone is the single most traded pair in the world.

Crosses (minors)

A cross pairs two major currencies without the dollar, for example EUR/GBP, EUR/JPY, GBP/JPY, AUD/NZD, EUR/CHF or CAD/JPY. Some traders call them "minors". Crosses with the euro are sometimes called euro crosses, and those with the yen, yen crosses.

The eight major currencies (USD, EUR, JPY, GBP, CHF, AUD, NZD, CAD) make 28 possible pairs: 7 majors and 21 crosses. That is the universe the DanioX forex market page tracks, with a strength ranking of all eight currencies.

Exotics

An exotic pairs a major currency with the currency of a smaller or emerging economy, for example USD/TRY (Turkish lira), USD/ZAR (South African rand), USD/MXN (Mexican peso), USD/SGD (Singapore dollar) or EUR/PLN (Polish zloty).

Exotics are harder for beginners because:

• Spreads are wider, often several times those of the majors, and widen further in quiet hours.
• Swaps are large, because interest rates in these countries can be far higher or lower than in the US or Europe.
• Moves can be sudden, including gaps when a government or central bank changes policy, imposes capital controls or devalues.
• Some are managed or pegged, which can mean long calm periods followed by a sharp jump.

What about the Pakistani rupee?

Online brokers rarely offer PKR pairs, and the rupee's rate is influenced by the State Bank of Pakistan's policy and by import and export flows. For a trader in Pakistan this matters in a different way: if you trade a dollar-denominated account, your profits and losses are in dollars, and converting them into rupees adds a second exchange-rate risk and the conversion cost of your bank or payment service.

Choosing pairs as a beginner

Start with a few majors, such as EUR/USD, GBP/USD and USD/JPY, because they are cheap to trade, widely covered by news and analysis, and behave more predictably during normal hours. Learn how each one reacts to its own central bank and data before adding crosses. Leave exotics until you understand swaps and gap risk.

Next, learn what it actually costs to trade a pair in Bid, Ask and Spread.