Reading A Currency Quote

Currencies are quoted in pairs, e.g. GBP/USD, USD/CHF etc. The first listed currency is called the “base” currency. The base currency is the basis for the buy or sell transaction. The second listed currency is called the “counter” or “quote” currency. As an example, if you place a buy GBP/USD order with your broker what you have effectively done is sell US dollars and bought Great British pounds (GBP). By definition, the first currency is the stronger between the two.

Let’s look at another example:

USD/CAD
If you believe that the Canadian government is going to weaken its currency (Canadian dollar) in order to help its export industry you would BUY USD/CAD (in trading terms: GO LONG). Why? Because you want to own US dollars while they appreciate against the Canadian dollar.