How to Value Currency Pairs
Typically, in the FOREX market, currencies are traded in pairs. For example, Euro/US Dollar or US Dollar/Japanese Yen. Whenever you trade currencies online, you are then, buying one currency and selling another. Currency pairs are abbreviated. The above pairs would be EUR/USD and USD/JPY. The currency on the left is called the base currency, and the one on the right is the cross currency.
The value of a currency pair is determined by the strength or weakness of the base currency in relation to the cross currency. The base currency value is always 1. That means when you see a quote of 1.4652 for the EUR/USD, its value means 1 Euro will buy 1.4652 dollars. The next day you may see a quote for the EUR/USD of 1.4725. If you listen to the financial news you will hear them say something along the lines of, “the Euro gained strength against the Dollar today”, or “the Dollar fell today against the Euro”. In pocketbook english, that simply means it takes more dollars today to buy 1 Euro than yesterday.

