What Is the Currency Pair: EUR/USD (Euro/U.S. Dollar)?
The Currency Pair EUR/USD is the shortened term for the euro against the U.S. dollar pair, or cross for the currencies of the European Union (EU) and the United States (USA). The currency pair indicates how many U.S. dollars (the quote currency) are needed to purchase one euro (the base currency). Trading the EUR/USD currency pair is also known as trading the "euro." The value of the EUR/USD pair is quoted as 1 euro per x U.S. dollars. For example, if the pair is trading at 1.50, it means it takes 1.5 U.S. dollars to buy 1 euro.
Key Takeaways
- The EUR/USD is the world’s most-traded forex pair.
- Its value represents the number of U.S. dollars required to buy a single euro.
- It is affected by government and economic policies, as well as supply and demand dynamics in currency markets.
Basics of Currency Pair: EUR/USD (Euro/U.S. Dollar)
The EUR/USD pair is the most widely traded pair in the world. The pair represents two of the world’s biggest economies. It is affected by factors that influence the value of the euro and the U.S. dollar in relation to each other and to other currencies.
For example, the interest rate differential between the European Central Bank (ECB) and the Federal Reserve (Fed) can have a major influence on the value of these currencies when compared to each other. When the Fed intervenes in open market activities to make the U.S. dollar stronger, the value of the EUR/USD cross could pull back or decline due to strengthening U.S. dollar compared to the euro.
Along the same lines, bad news from the EU economy may have an adverse effect on prices for the EUR/USD pair. News of the government debt crisis and immigrant influx in Italy and Greece resulted in a euro selloff, prompting the pair's exchange rate to plunge.
More recently, in 2022, the EUR/USD pair infamously briefly plunged below 1.00 for the first time in history, as rising interest rates in the U.S. helped make the American currency stronger, while the war in Ukraine and the energy crisis it brought about took a toll on its European counterpart.
Brief History of the Euro Currency
The euro currency originated in 1992 as a result of the Maastricht Treaty. It was originally introduced as an accounting currency in 1999. On Jan. 1, 2002, the euro began circulating in member countries of the EU, and over the course of several years, it became the accepted currency of the European Union,ultimately replacing local currencies of many of its members.
Consequently, the euro integrates and represents a large number of European economies. This serves to stabilize currency exchange rates and volatility for all members of the European Union. It also makes the euro one of the most heavily traded currencies in the forex market, second only to the U.S. dollar.
As of July 2024, 20 of the 27 EU member countries use the euro, including the most recent addition, Croatia, which adopted the currency in January of 2023. According to the latest ECB figures, there are over 29 billion euro banknotes in circulation with a combined value upwards of €1.5 trillion.
Reading a EUR/USD Price Chart
Unlike a price chart for a stock where the indicated price directly represents a price for the stock, the price listed on a price chart for a currency pair represents the exchange rate of the two currencies. Therefore, the directional indication of a chart corresponds to the base currency.
Using the earlier example, when a trader takes a long position in the EUR/USD at 1.50, as the rate increases to 1.70, the euro strengthens (as indicated on the price chart), and the U.S. dollar weakens. Now it takes $1.70 (more dollars) to purchase 1.00 euro, making the dollar weaker and/or the euro stronger.
It is important to understand that the base currency of the pair is fixed and always represents one unit. Thus, the source of the strengthening or weakening is not reflected in the rate. The EUR/USD rate can increase because the euro is getting stronger or the U.S. dollar is getting weaker. Either condition results in an upward movement in the rate (price) and a corresponding upward movement in a price chart.
FAQs
A widely traded currency pair is the relation of the euro against the US dollar, designated as EUR/USD. The quotation EUR/USD 1.2500 means that one euro is exchanged for 1.2500 US dollars. Here, EUR is the base currency and USD is the quote currency (counter currency).
What is an EUR/USD pair? ›
The Currency Pair EUR/USD is the shortened term for the euro against the U.S. dollar pair, or cross for the currencies of the European Union (EU) and the United States (USA). The currency pair indicates how many U.S. dollars (the quote currency) are needed to purchase one euro (the base currency).
What are the 7 major currency pairs? ›
7 major forex pairs
- The euro and US dollar: EUR/USD.
- The US dollar and Japanese yen: USD/JPY.
- The British pound sterling and US dollar: GBP/USD.
- The US dollar and Swiss franc: USD/CHF.
- The Australian dollar and US dollar: AUD/USD.
- The US dollar and Canadian dollar: USD/CAD.
- The New Zealand dollar and US dollar: NZD/USD.
Key Takeaways. A currency pair is a price quote of the exchange rate for two different currencies traded in FX markets. When an order is placed for a currency pair, the first listed currency or base currency is bought while the second listed currency in a currency pair or quote currency is sold.
Is USD EUR and EUR USD the same? ›
While most currency pairs that quote the dollar list the dollar as the numerator or base currency, EUR/USD has the euro first and the reason is mostly due to convention. The euro was introduced as an accounting currency in 1999 and is the second most active currency behind the U.S. dollar.
What is the strongest currency in the world? ›
The highest-valued currency in the world is the Kuwaiti Dinar (KWD). Since it was first introduced in 1960, the Kuwaiti dinar has consistently ranked as the world's most valuable currency. Kuwait's economic stability, driven by its oil reserves and tax-free system, contributes to the high demand for its currency.
What are you doing if you buy the EUR USD currency pair? ›
For instance, a trader purchasing the forex pair EUR/USD is exchanging dollars for Euros. The pair is followed by a price quote – the amount of quote currency it would take to buy one unit of the base currency.
What is the most predictable currency pair? ›
A: The most predictable forex pairs include EUR/GBP, AUD/USD, NZD/USD, EUR/CHF, CHF/JPY, and GBP/JPY.
What is the most traded currency pair in the world? ›
The EUR/USD is the most traded of all forex pairs in the world. That's largely because it is the two biggest western economies trading against one another.
Which currency pair is the most profitable? ›
The Best Forex Major Currency to Trade
- EUR/USD: The Euro and US dollar. ...
- USD/JPY: The US dollar and Japanese Yen. ...
- GBP/USD: The British pound sterling and US dollar. ...
- USD/CHF: The US dollar and Swiss Franc. ...
- AUD/CAD: The Australian dollar and Canadian dollar. ...
- NZD/USD: The New Zealand dollar and US dollar.
The inverse quotation of the EUR/USD, i.e. the USD/EUR, represents the price in euros of each dollar. For example, the EUR/USD exchange rate of 1.5415 means that the inverse quotation, USD/EUR, corresponds to 0.6487, i.e. the inverse of 1.5415 (1/1.5415).
How to understand currency pairs? ›
The price of a currency pair is how much one unit of the base currency is worth in the quote currency. For example, for the currency “EUR/USD”, EUR is the base currency and USD is the quote currency. If EUR/USD is trading at 1.0950, then one euro is worth 1.0950 U.S. dollars.
What is the nickname for the EUR/USD currency pair? ›
EUR/USD - The Fiber
One of the most widely traded currency pairs is the EUR/USD, also known as the "Fiber." This nickname is derived from the fact that the Euro is often called the "Fiber" due to its stability and reliability.
Is the euro stronger than the dollar? ›
Euro to US Dollar Exchange Rate is at a current level of 1.092, down from 1.097 the previous market day and down from 1.098 one year ago. This is a change of -0.47% from the previous market day and -0.63% from one year ago.
Is the euro replacing the dollar? ›
It's embedded successfully as the domestic means of exchange within the 20-nation euro zone. While its survival is no longer threatened, the common currency has made little progress in its broader aim of challenging the dollar's role as the world's reserve currency — and has instead gone backward.
Is Eurusd a good pair? ›
Why is EUR/USD important in the forex market? EUR/USD is an important pair in the forex market because it is one of the most traded currency pairs in the world. Both European euro and US dollar are world's reserve currencies.
What happens when you buy a currency pair? ›
To buy a currency pair means that you expect the price to rise, indicating that the base currency is strengthening relative to the quote currency. To sell a currency pair means that you expect the price to fall, which would happen if the base currency weakened against the quote.
What pair does Eurusd correlate with? ›
EUR/USD and GBP/USD
The forex pairs increase and decrease are often viewed as equals. They correlate so well because of their relationship with the US dollar, the pound, and the Euro. All three currencies are intertwined by their strong economic ties.
What is the EUR USD pair forecast? ›
In terms of support levels to watch, the area near 1.0900 is the first line of defence for the bulls, followed by 1.0835, which will need to hold to maintain a bullish technical outlook on the EUR/USD. In terms of upside hurdles, resistance is seen at 1.1000 which was tested on Monday and held firm.
