Currencies in the forex market are traded in pairs such as the British pound against the US dollar, the US dollar against the euro, with the aim of making profits through the spreads.
Currency rates in Forex are determined based on the rate of supply and demand, while the price differences between them are known as the “spread”. Below we will show the most common currency pairs in the forex world:_
- The euro / US dollar is referred to by the symbol (USD / EUR).
- The British pound / US dollar is referred to by the symbol (USD / GBP).
- US dollar / Japanese yen (JPY / USD).
- Euro / Japanese yen (JPY / EUR).
- Australian dollar / US dollar, referred to as (USD / AUD).
- The New Zealand dollar / US dollar is referred to by the symbol (USD / NZD).
- The Canadian dollar / US dollar and symbolized by (USD / CAD).
The forex market has a lot of different currencies from all over the world, and the foreign currencies in the market are divided into: major currencies, minor currencies and western pairs. Major pairs include 7 most popular pairs mentioned previously, while in minor pairs the major currencies are traded between them except for the US dollar, while the western pairs have one major and one minor currency such as USDNOK and EURTRY.
The major currencies depend entirely on the world's most powerful economies such as the United States, Japan, Switzerland, the Eurozone, Canada, the United Kingdom and New Zealand.
The trading price of a currency pair is the value of the quoted currency that you can buy for one unit of the base currency.
For example: the euro and the US dollar are the most popular and traded currency pair in the forex market. When looking for the exchange rate of the Euro against the US Dollar, you want to know how many dollars (the quote currency) you can buy for 1 Euro (the base currency).
If the EUR/USD exchange rate is 1.2356, this means that you can buy 1.2356 USD for every 1 EUR.
If the exchange rate is in an upward trend, this means that the base currency is getting stronger against the secondary currency.
But if the exchange rate is in a downtrend, this means that the base currency is weakening against the secondary currency.
On the other hand, the spreads change according to the popularity of each currency pair, which is determined by the daily trading volume of this pair. Usually, the volume of liquidity and the price differences are directly related, meaning that the higher the liquidity rate leads to the lower the spreads and vice versa.