EUR/USD currency pair represents the euro versus the U.S. dollar and is different than most others because the dollar is the denominator or quote currency. Other currency pairs involving the U.S. dollar typically include the dollar as the numerator or base currency. As a result, when the dollar strengthens against the euro, EUR/USD moves lower, and during periods of dollar weakness (vs. the euro), the pair increases in value.
Understanding Currency Pairs
In a currency pair, the first currency is called the base currency, and the second is called the quote currency. Currency pairs can also be separated into two types, direct and indirect. In a direct quote, the foreign currency is the base currency, while the local currency is the quote currency. An indirect quote is just the opposite: the domestic currency is the base currency, and the foreign currency is the quote currency.
Key Takeaways
- EUR/USD is the euro versus dollar currency pair.
- A currency pair is a fraction that includes a numerator and a denominator, which are also called the base currency and quote currency.
- 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.
- Despite its unconventional format, EUR/USD is the most actively traded currency pair in the world.
The way currency pairs are quoted can vary depending on the country in which the trader lives—most countries use direct quotes, while the U.K., Australia, New Zealand, and Canada prefer indirect quotes. Most pairs using the U.S. dollar are direct quotes.
However, for an American trader, a EUR/USD quote is an indirect one. So, for example, a quote of 0.80 EUR/USD means that 1 EUR would cost you $0.80.If the pair appreciates to 1.00, the euro has increased in value because it now costs $1 to buy a euro. On the other hand, if the pair is quoted .75, the dollar is seeing strength because it now costs just $0.75 to buy a euro.
Euro vs. Dollar
The euro currency originated because of the Maastricht Treaty in 1992 and was introduced as an accounting currency in 1999. The euro began circulating in countries of the European Union on Jan. 2002 and, over the years, replaced the currencies of most member nations. The euro has become the second most active currency in the world behind the U.S. dollar and the EUR/USD pair sees the most trading in the world of currency pairs trading.
Even though nearly 90% of the currency trades made around the world involve the U.S. dollar and the majority of pairs list the dollar first, the EUR/USD currency pair is always quoted indirectly. The reason for this is mostly convention. A EUR/USD quote could easily be shown as USD/EUR by making a simple calculation, but there are no strict rules that determine whether a currency pair is shown directly or indirectly.
FAQs
3 The reason for this is mostly convention. A EUR/USD quote could easily be shown as USD/EUR by making a simple calculation, but there are no strict rules that determine whether a currency pair is shown directly or indirectly. Investopedia requires writers to use primary sources to support their work.
What is the currency pair of the EUR USD? ›
The Currency Pair EUR/USD is the shortened term for the euro against U.S. dollar pair, or cross for the currencies of the European Union (EU) and the United States (USD). The currency pair indicates how many U.S. dollars (the quote currency) are needed to purchase one euro (the base currency).
How do you quote 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). This means that 1 Euro can be exchangeable to 1.25 US Dollars. The most traded currency pairs in the world are called the Majors.
What is the correlation between EUR and USD? ›
EUR/USD Correlations
| EUR/USD | USD/JPY | USD/CHF |
|---|
| 1 week | -0.23 | -1.00 |
| 1 month | 0.63 | -0.98 |
| 3 month | -0.62 | -0.92 |
| 6 month | -0.62 | -0.85 |
1 more rowFor the EUR/USD pair, it involves the EUR and USD currencies. Simply put, when you buy EUR, you are selling USD, and vice versa when you sell EUR, you are buying USD. For trading in EUR/USD, you should pay attention to the fundamental conditions in the European and US regions.
Why is it EUR USD and not USD EUR? ›
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 are the USD 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.
Major currency pairs, such as EUR/USD, GBP/USD, and USD/JPY, are characterized by high liquidity. This makes them suitable for scalping strategies as traders can quickly enter and exit positions without significant slippage.
What is the bias of EUR USD? ›
Intraday bias in EUR/USD is turned neutral again first with current retreat. On the upside, firm break of 1.0915 will resume whole rise from 1.0601. On the downside, break of 1.0718 will resume the fall from 1.0915 instead.
What forex pairs don t correlate? ›
Two non-correlated currency pairs would be EUR/USD and GBP/NZD. There is no relationship between these pairs and they do not affect the movement of one another.
When you buy a currency pair from a forex broker, you buy the base currency and sell the quote currency. Conversely, when you sell the currency pair, you sell the base currency and receive the quote currency. Currency pairs are quoted based on their bid (buy) and ask prices (sell).
Is it better to pay in EUR or USD? ›
The benefits of paying in local currency
Your bank may charge a fee to carry out the transaction. The rate your card provider uses when processing local currency payments will, in most cases, be lower than that of the merchant, or foreign bank, when paying in dollars (USD).
How much is $100 euros in U.S. dollars? ›
Euros to US Dollars conversion rates
| EUR | USD |
|---|
| 100 EUR | 106.75 USD |
| 500 EUR | 533.75 USD |
| 1,000 EUR | 1,067.50 USD |
| 5,000 EUR | 5,337.51 USD |
7 more rowsConvert Euro to US Dollar
| EUR | USD |
|---|
| 1 EUR | 1.07426 USD |
| 5 EUR | 5.37132 USD |
| 10 EUR | 10.7426 USD |
| 25 EUR | 26.8566 USD |
6 more rowsSimply put, a cross-currency pair consists of any two currencies traded on forex, excluding the US Dollar. For example, a EUR/GBP pair would be considered a cross-currency pair. Namely, there are two types of cross-currency pairs known in the forex trading world: minor currency pairs and exotic currency pairs.
