A quotation of two different currencies is depicted by a currency pair. The first currency that is present in the pair is referred to as the base currency also called transaction currency. Whereas the second currency in the pair is know as quote currency #160; also referred to as payment currency and counter currency. By such a quotation it is depicted that how many units of the counter currency are required to buy one unit of the base currency.

For example if the quotation is EUR/USD 1.2500 then it means that one euro is exchanged for 1.25 US dollar. If the quote is moved from EUR/USD 1.2500 to EUR/USD 1.2510, then it showed that euro is getting stronger and the dollar is becoming weaker. On the other hand if the EUR/USD quote moves from 1.2500 to 1.2490 then it elaborates that euro is getting weaker while the dollar is getting stronger.

Majors

The most liquid and widely traded currency pairs in the world are Majors. Trades in which majors are involved forms about 90% of total Forex trading.

The Majors are: EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD and USD/CAD.

The only currency pair with its own name is GBP/USD. It is referred to as "Cable", which takes its origins from the days when a cable under the Atlantic synchronized the GBP/USD rate between the London and New York markets.

Cross Rates

Cross rate is  a name given to that currency pair that does not include USD, such as GBP/JPY. Pairs in which the EUR is involved are called euro crosses, such as EUR/GBP. All other currency pairs in which USD and EUR are not involved are generally referred to as cross rates.

Spread

spot price is the usually quoted rate. There are two prices for a real transaction:

• the lower price (bid)
• the higher price (ask)

The lower price (bid)

The price at which a market maker or a brokerage in general is willing to buy the first currency of a pair is known as the lower price (bid).

The higher price (ask)

The price at which a brokerage is willing to sell the first currency of a pair is known as the higher price (ask).

For instance if the quotation of EUR/USD is 1.3607/1.3609, then USD 0.0002 (or 2 pips) is the spread. Generally saying, the more popular the pair is, the smaller will be the differences or spreads. Different spreads are there that different brokerage firms have.

Currency Correlation

The strength and direction of a linear relationship between two currency pairs are statistically measured by the Currency correlation. Currency correlation is computed as a correlation coefficient. In the broader sense we can say that currency correlation is the correlation between any currency pairs and the commodities, stocks and bonds markets.

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