Forex Currency Pair Descriptions

In the forex market, currency trading is always done in currency pairs, such as EUR/USD (or USD/JPY). Accordingly, all trades result in the simultaneous buying of one currency and the selling of another. The base currency is the "basis" for the buy or the sell. It is useful to consider the currency pair as an instrument, which can be bought or sold.

If, for example, you think the US stock market will continue to fall and that will hurt the USD, you click on BUY, you are buying Euros expecting them to go up against the USD. If you click on Sell you buy US Dollars expecting them to climb against the Euro.

If, for example, you think that the Japanese government is going to weaken the Yen in order to help their export industry, you would click on BUY, expecting the US Dollar to increase in value against the Yen. If you think that Japanese investors are pulling money out of US financial markets and repatriating funds back to Japan you would click on SELL, expecting the Yen to strengthen against the US Dollar as Japanese investors sell their assets and convert their dollars to Yen.

If, for example, you think the British Economy will continue to be the leading economy amongst the G7 nations in terms of growth thus buoying the Pound, you would click BUY, expecting the British Pound to strengthen against the US Dollar. If you believe the British are about to commit themselves to adopting the Euro, you would click SELL, expecting the Pound to weaken against the Dollar as the British devalue their currency in anticipation of merging with the Euro.

If, for example, you think the Swiss Franc is overvalued and that the US economy will recover quickly, you would click BUY, expecting the US Dollar to strengthen against the Swiss Franc. If you believe that due to instability in the middle east and in US Financial Markets the Dollar will continue to weaken, you would click SELL, expecting the Swiss Franc to strengthen against the Dollar.

If, for example, you think the Swiss government wishes to devalue the currency to help exports in Europe, you would click BUY, expecting the Euro to increase in value against the Swiss Franc. If inflation started taking off in Germany and France, you would click SELL expecting the Swiss Franc to increase in value against a devalued Euro.

If, for example, you think that commodity prices are going to rise dramatically thus benefiting the AUD, you would click BUY, expecting the Aussie to strengthen against the US Dollar due to Australia being a leading exporter of many commodities. If you believe that Australia is heading into recession, you would click SELL, expecting the US Dollar to strengthen against the AUD.

If, for example, you think that the US economy is going to rebound while the Canadian economy goes into recession, you would click BUY, expecting the US Dollar to strengthen against the Canadian Dollar. If you believe the Canadian Dollar is fundamentally undervalued and will strengthen against the US Dollar, you would click SELL, expecting the CAD to rise against the US Dollar.

If, for example, you think the success of Lord of the Rings will cause tourists to flock to New Zealand and pump money into the local economy, you would click BUY, expecting the NZD to strengthen in value against the US Dollar. If you expect the AUD is going to fall, along with commodity prices, you would click SELL expecting the NZD to drop in value against the US Dollar.

If, for example, you believe the British are about to commit themselves to adopting the Euro, you would click BUY, expecting the Pound to weaken against the Euro as the British devalue their currency in anticipation of the merger. If you believe that Great Britain's economy will grow at a faster rate than Europe's, you would click SELL, expecting the British Pound to rise in value against the Euro.

If, for example, you believe that the Japanese banking crisis will continue to get worse, you would click BUY expecting the Euro to rise against the Yen. If, for example, you believe that Europe is going into recession thus weakening the Euro, you would click SELL, expecting the Euro to drop in value against the Yen.

If, for example, you believe that the BOE is going to raise interest rates, you would click BUY, expecting the British Pound to increase against the Yen due to interest rate arbitrage. If you think the Nikkei index will rise at a higher rate than the FTSE thus buoying the Yen, you would click on SELL, expecting the Yen to increase against the British Pound.

If, for example, you believe conflict in the Middle East may cause a spike in oil prices, you would click BUY, expecting the CHF to increase against the Yen due to Japan's reliance on imported oil and the CHF's safe haven status. If you believe there will be more stability in the region, you would click SELL, expecting the Yen to rise against the CHF.

If, for example, you believe that the BOE is going to raise interest rates, you would click BUY, expecting the British Pound to increase against the CHF due to interest rate arbitrage. If you believe the British are about to commit themselves to adopting the Euro, you would click SELL, expecting the Pound to weaken against the CHF as the British devalue their currency in anticipation of merging with the Euro.

If you believe that Australia is heading into recession, you would click BUY, expecting the Euro to strengthen against the AUD. If for you think that commodity prices are going to rise dramatically, you would click SELL, expecting the Aussie to strengthen against the Euro due to Australia being a leading exporter of many commodities.

If, for example, you think that the German economy is going to rebound while the Canadian economy goes into recession, you would click BUY, expecting the Euro to strengthen against the Canadian Dollar. If you believe the German economy will go into recession and drag the Euro down with it, you would click SELL, expecting the Canadian Dollar to rise against the Euro.

If, for example, you think that the Australian economy is going to grow while the Canadian economy goes into recession, you would click BUY, expecting the AUD to strengthen against the Canadian Dollar. If you believe the Australian economy will go into recession, you would click SELL expecting the Canadian Dollar to rise against the AUD.

If, for example, you think that the Australian economy is going to grow while the Japanese economy goes into recession, you would click BUY, expecting the AUD to strengthen against the Yen. If you believe the Australian economy will go into recession due to falling commodity prices, you would click SELL, expecting the Yen to rise against the AUD.