Forex Trading Currency Pairs 3

Question 1

Which currency pair typically has the lowest spread in the forex market?

Accepted Answer

EUR/USD

Answer

EUR/USD is the most traded pair in the world, resulting in the highest liquidity and typically the tightest spreads.

Question 2

If EUR/GBP is 0.8600 and EUR/USD is 1.2000, what is the implied GBP/USD rate?

Accepted Answer

1.3953

Answer

GBP/USD = EUR/USD ÷ EUR/GBP = 1.2000 ÷ 0.8600 ≈ 1.3953.

Question 3

What does 'going long' on GBP/USD mean?

Accepted Answer

Buying GBP and selling USD

Answer

Going long on GBP/USD means buying the base currency (GBP) while simultaneously selling the quote currency (USD).

Question 4

Which of the following best describes a 'major' currency pair?

Accepted Answer

A pair that includes the US Dollar and a major global currency

Answer

Major pairs are defined as currency pairs that include the US Dollar paired with another widely traded currency like EUR, GBP, JPY, or CHF.

Question 5

Why does GBP/JPY tend to have higher volatility than EUR/USD?

Accepted Answer

GBP and JPY are both high-volatility currencies that amplify movements

Answer

GBP/JPY combines two independently volatile currencies, and their compounded fluctuations result in higher overall pair volatility.

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