How Currency Pairs Work — Market Fundamentals
A currency only has value relative to something else. Saying '1 euro' tells you nothing about worth until you compare it to another currency, like the U…
Why Currencies Come in Pairs
A currency only has value relative to something else. Saying '1 euro' tells you nothing about worth until you compare it to another currency, like the US dollar. That's why forex prices are always shown as pairs, such as EUR/USD or USD/JPY — each quote expresses how much of the second currency it takes to buy one unit of the first.
[Read the lesson: How Currency Pairs Work](/learn-to-trade/market-fundamentals/how-currency-pairs-work)
Reading a Currency Pair Quote
Take EUR/USD = 1.0850. This tells you that 1 euro can be exchanged for 1.0850 US dollars. If the quote changes to EUR/USD = 1.0870, each euro now buys more dollars, meaning the euro has strengthened relative to the dollar (or equivalently, the dollar has weakened).
Every currency pair quote is read the same way: the number shows how many units of the second currency equal one unit of the first currency.
**Reading USD/JPY:** If USD/JPY = 149.50, then 1 US dollar equals 149.50 Japanese yen. If the quote rises to 150.00, the dollar has become stronger against the yen, since each dollar now buys more yen.
[Read the lesson: How Currency Pairs Work](/learn-to-trade/market-fundamentals/how-currency-pairs-work)
Rising vs. Falling Quotes
When a pair's price rises, the first currency in the pair is strengthening against the second. When the price falls, the first currency is weakening. Keeping this cause-and-effect clear in your mind prevents confusion when deciding whether to buy or sell.
[Read the lesson: How Currency Pairs Work](/learn-to-trade/market-fundamentals/how-currency-pairs-work)