All About Pairs - Introduction to Currency Pairs

What is a Currency Pair?

A currency pair is any two currencies that are traded against each other. An example of a currency pair would be the EUR/USD or the Euro vs. US Dollar. The first currency listed is the called the "base" currency and the second currency listed is called the "quote", or sometimes the "counter" currency. For the EUR/USD pair the quote price is shown as how many US Dollars (the quote currency) 1 Euro (The base currency) could purchase. At the time of this writing 1 Euro could purchase 1.0984 US Dollars.

What are the major currency Pairs?

The traditional major Forex pairs are:

  • EUR/USD  - Euro vs. US Dollar  - Known as "EURO"
  • USD/JPY  - US Dollar vs. Japanese Yen – Known as "Yen"or "Dollar Yen"
  • GBP/USD  - Great British Pound vs. US Dollar – Known as "Cable"
  • USD/CHF  - US Dollar vs. Swiss Frank – Known as "Swissy" or "Dollar Swissy"
  • USD/CAD  - US Dollar vs. Canadian Dollar – Known as "Loonie"
  • These are the major pairs the will be covered regularly in the Forex Service:

What are some of the other minor currency pairs?

Some of the other very popular trading pairs that will also receive regular coverage are as follows:

  • AUD/USD  - Australian Dollar vs. US Dollar  - Known as "Aussie" or "Ozzie"
  • NZD/USD  - New Zealand Dollar vs. US Dollar  - Known as "Kiwi"
  • USD/SEK  - US Dollar vs. Swedish Krona (crown)
  • USD/NOK  - US Dollar vs. Norwegian Krone (crown)
  • USD/SDG  - US Dollar vs. Singapore Dollar
  • USD/MXN  - US Dollar vs. Mexican Peso
  • USD/RUB  - US Dollar vs. Russian Ruble

What are cross Pairs:?

Cross pairs are any two currency pairs that do not involve the US Dollar. The value of these cross pairs can be calculated by using the two underlying US Dollar pairs that compose this cross pair using a simple algebraic formula. (see attachment for the formula for cross pairs)

A partial list of some of the cross currency pairs:

  • EUR/GBP - Euro vs. Great British Pound - Known as "Chunnel"
  • EUR/JPY - Euro vs. Japanese Yen
  • EUR/CHF - Euro vs. Swiss Frank
  • EUR/CAD - Euro vs. Canadian Dollar
  • GBP/JPY - Great British Pound vs. Japanese Yen
  • GBP/CAD - Great British Pound vs. Canadian Dollar
  • AUD/JPY - Australian Dollar vs. Japanese Yen

What pairs make up the US DOLLAR INDEX (DXY)?

The pairs that make up the US DOLLAR Index and how they are weighted in the index are as follows:

  • EUR/USD  - Accounts for 57.6% of the index
  • USD/JPY  -  Accounts for 13.6% of the index
  • GBP/USD  -  Accounts for 11.9% of the index
  • USD/CAD  -  Accounts for 9.1% of the index
  • USD/SEK  -  Accounts for 4.2% of the index
  • USD/CHF  -  Accounts for 3.6% of the index

What are Gold & Silver "Pairs"?

Most Forex Brokers will also allow you to trade Gold & Silver based "currency" pairs. The symbol for Gold & Silver pairs is XAU & XAG. These pairs are quoted as XAU/USD, XAG/USD, XAU/EUR, XAG/EUR, etc. You will be charged a rollover rate for holding these pairs just as you would any other currency.  In the United States there is NO leverage on precious metals pairs due to regulatory changes in the Dodd-Frank Act. Outside of the US these precious metals pairs have similar leverage to that of any other regular Forex pair which makes them more advantageous to trade as you can take advantage of leverage when trading these "pairs".

Cross Pair Formula
Cross Pair Formula
Michael Golembesky covers Forex, the S&P 500 and the VIX, contributing frequently to Avi's Market Alerts service at EWT while also hosting his own VIX Trade Alerts service and co-hosting the EWT Forex service. Learn more about Mike here and his services here.