Currency Pair Description

In the forex market, currency trading is always done in currency pairs, such as EUR/USD or USD/JPY. The primary or base currency (the one in front) is the "basis" for the buy or the sell. Although all trades technically involve the simultaneous buying of one currency and the selling of another, it is also useful to consider the currency pair as an instrument or a single entity that can be bought or sold. The following are examples of situations that might lead you to trade a particular currency pair:

EUR/USD

U.S. Dollar weakness will drive EUR/USD higher
US recovery and strong influx of foreign demand will send EUR/USD lower

If, for example, you think the US economy will continue to worsen and that will hurt the U.S. Dollar, you would click BUY, which means that you are buying the Euro and selling the U.S. Dollar. If, for example, you think there will be increased foreign demand for US assets such as equities and treasuries and that will benefit the U.S. Dollar, you would click SELL, which means that you are selling the Euro and buying the U.S. dollar.

USD/JPY

Bank of Japan intervention to weaken the Yen will send USD/JPY higher
Gains in Nikkei and demand for Japanese assets will drive USD/JPY down

If, for example, you think that the Japanese government will weaken the Yen in order to help its export industry, you would click BUY, expecting the U.S. 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 into the Japanese asset markets, such as the Nikkei, you would click SELL, expecting the Yen to strengthen against the U.S. Dollar.

GBP/USD

Economic recovery in the UK will drive GBP/USD higher
Continuing weakness in the U.K. banking sector will send the GBP/USD lower

If, for example, you think the British economy will recover sooner than analysts forecast, thus buoying the Pound, you would click BUY, expecting the British Pound to strengthen against the U.S. Dollar. If you believe that more British banks are about to require bailout, you would click SELL, expecting the Pound to weaken against the U.S. Dollar.

USD/CHF

Easing of the global credit crisis will send USD/CHF higher
USD/CHF will fall on geopolitical instability

If, for example, you think that global financial markets are recovering and investors no longer have to park their money in the safe haven of the Swiss Franc, you would click BUY, expecting the U.S. Dollar to strengthen against the Swiss Franc. If you believe that Middle East instability will spook US financial markets and weaken the U.S. Dollar, you would click SELL, expecting the Swiss Franc to strengthen against the U.S. Dollar.

EUR/CHF

Swiss government intervenes to weaken the Franc, sending EUR/CHF higher
German banks reveal more bad loans, driving EUR/CHF lower

If, for example, you think the Swiss government will devalue the currency to help exporters to Europe, you would click BUY, expecting the Euro to increase in value against the Swiss Franc. If more bad loans show up in German and French banks, you would click SELL, expecting the Swiss Franc to increase in value against a devalued Euro.

AUD/USD

Rising commodity prices will send AUD/USD higher
Drought will hurt Australian economy and AUD/USD

If, for example, you think that commodity prices are going to rise dramatically, thus benefiting the AUD, you would click BUY, expecting the Australian Dollar to strengthen against the U.S. Dollar due to Australia being one of the world's leading commodity exporters. If you believe that Australia will face drought, hurting the domestic economy, you would click SELL, expecting the U.S. Dollar to strengthen against the Australian Dollar.

USD/CAD

Falling commodity prices will send USD/CAD higher
Strong banking sector in Canada outperforms the US and will drive USD/CAD lower

If, for example, you think that weak commodity prices will keep the Canadian economy in recession, you would click BUY, expecting the U.S. Dollar to strengthen against the Canadian Dollar. If you believe that the strong banking sector in Canada will attract foreign investment, you would click SELL, expecting the Canadian Dollar to rise against the U.S. Dollar.

NZD/USD

Increased tourism and migration to New Zealand will lift NZD/USD
Growing deficits in the New Zealand budget will send NZD/USD lower

If, for example, you think more tourists will flock to New Zealand and pump money into the local economy, you would click BUY, expecting the New Zealand Dollar to strengthen in value against the U.S. Dollar. And since the New Zealand Dollar’s strong correlation with the Australian Dollar will cause a sympathy selloff when the Australian Dollar weakens, you would click SELL, expecting the New Zealand Dollar to drop in value against the U.S. Dollar.

EUR/GBP

Speculation about UK adopting the Euro will send EUR/GBP higher
Faster UK growth over the Eurozone growth will drive EUR/GBP lower

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 to be more competitive. If you believe that the UK 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.

EUR/JPY

Fears of a Japanese banking crisis will send EUR/JPY higher
Eurozone recession will drive EUR/JPY lower

If, for example, you believe that a Japanese banking crisis will develop, you would click BUY expecting the Euro to rise against the Yen. If for example you believe that Europe will remain in recession while Japan recovers, , you would click SELL, expecting the Euro to drop in value against the Yen.

GBP/JPY

Interest rate hikes by the Bank of England will send GBP/JPY higher
Strong demand for Japanese assets will drive GBP/JPY lower

If, for example, you believe that the Bank of England is going to raise interest rates, you would click BUY, expecting the British Pound to increase in value against the Yen as Japanese investors look abroad for higher returns. If you think the Nikkei index will rise at a higher rate than the FTSE, you would click SELL, expecting the Yen to increase against the British Pound.

CHF/JPY

Middle East conflict and volatility in oil prices will drive CHF/JPY higher
Geopolitical stability will send CHF/JPY lower

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 the safe-haven status of the Franc. If you believe that stability will return to the region, you would click SELL, expecting the Yen to rise against the CHF.

GBP/CHF

Interest rate hikes by the Bank of England will send GBP/CHF higher
Speculation about UK adopting the Euro will send the GBP/CHF lower

If, for example, you believe that the Bank of England is going to raise interest rates, you would click BUY, expecting the British Pound to increase in value against the Swiss Franc. If you believe the UK is about to adopt the Euro, you would click SELL, expecting the Pound to weaken against the Franc as the UK devalues its currency in anticipation of merging with the Euro.

EUR/AUD

Recessionary conditions in Australia would send EUR/AUD higher
Rising commodity prices would push EUR/AUD lower

If, for example, you believe that Australia is heading into recession, you would click BUY, expecting the Euro to strengthen against the Australian Dollar. If you think that commodity prices are going to rise dramatically, you would click SELL, expecting the Australian Dollar to strengthen against the Euro due to Australia being one of the world's leading exporters of commodities.

EUR/CAD

German economic rebound and Canadian weakness will send EUR/CAD higher
Canadian economic strength and German weakness will send EUR/CAD lower

If, for example, you think that the German economy will 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.

AUD/CAD

Rate hikes by the Reserve Bank of Australia will drive AUD/CAD higher
Droughts hurt Australia's domestic economy and will send AUD/CAD lower

If, for example, you think that the Reserve Bank of Australia will continue to raise interest rates while the Bank of Canada leaves rates unchanged, you would click BUY, expecting the Australian Dollar to strengthen against the Canadian Dollar. If you believe that a drought will once again plague the Australian economy, you would click SELL, expecting the Canadian Dollar to rise against the Australian Dollar.

AUD/JPY

Japanese investment in Australia will drive AUD/JPY higher
Falling commodity prices hurt Australia's economy, sending AUD/JPY lower

If, for example, you think that there will be a resurgence of Japanese investment in Australian government bonds, you would click BUY, expecting the Australian Dollar to strengthen against the Yen. If you believe that falling commodity prices will hurt the Australian economy, you would click SELL, expecting the Yen to rise against the Australian Dollar.

NZD/JPY

Increase in Asian tourism to New Zealand will push NZD/JPY higher
Interest rate cut by the Reserve Bank of New Zealand will send NZD/JPY lower

If, for example, you think that more Japanese tourists will visit New Zealand, you would click BUY, expecting the Yen to decrease in value over the New Zealand Dollar. If you believe that the Reserve Bank of New Zealand will cut interest rates, you would click SELL, expecting the New Zealand Dollar to weaken against the Yen.

CAD/JPY

Pessimism towards the Japanese economy will drive CAD/JPY higher
Weaker Canadian exports will send CAD/JPY lower

If, for example, if you think the Japanese economy will remain weak due to lack of economic structural reform, you would click BUY, expecting the Canadian Dollar to rise against the Yen. If you believe that the weakened U.S. Dollar will cause Canadian exports to suffer, you would click SELL, expecting the Yen to increase in value over the Canadian Dollar.

NZD/CAD

Rate hikes by the Reserve Bank of New Zealand will drive NZD/CAD higher
Slowing agricultural imports in China will send NZD/CAD lower

If, for example, you think that the Reserve Bank of New Zealand will continue to raise interest rates while the Bank of Canada leaves rates unchanged, you would click BUY, expecting the New Zealand Dollar to strengthen against the Canadian Dollar. If you believe that a change in Chinese diet will reduce agricultural imports from New Zealand over imports from Canada, you would click SELL, expecting the Canadian Dollar to rise against the New Zealand Dollar.

USD/MXN

Fears of financial contagion curbing risk appetite will send USD/MXN higher
Global economic recovery spurring factory orders will drive USD/MXN lower

If, global investors fearing the financial contagion spreading to Latin America repatriate funds from Mexico to seek refuge in the U.S. Dollar, you would click BUY, expecting the U.S. Dollar to strengthen against the Mexican Peso. If you believe that global recovery prospects will benefit manufacturing in Mexico, you would click SELL, expecting the Mexican Peso to rise against the U.S. Dollar.