The quotation of one currency's value relative to another, expressed as a ratio such as EUR/USD.
Every forex trade involves simultaneously buying one currency and selling another, so prices are always quoted as a pair. The first currency listed - EUR in EUR/USD - is the base currency; the second - USD - is the quote currency. A price of 1.0850 means one euro buys 1.0850 US dollars. When a trader 'buys' EUR/USD they are buying euros and selling dollars; when they 'sell' they are doing the reverse.
Pairs are grouped by liquidity and trading volume. Major pairs consist of the US dollar and one of seven other currencies (EUR, GBP, JPY, CHF, CAD, AUD, NZD) and account for roughly 75% of daily forex turnover. Spreads on majors are the tightest in the market. Minor pairs (also called crosses) exclude USD but pair two major currencies - EUR/GBP, GBP/JPY - and carry moderately wider spreads. Exotic pairs combine a major currency with one from an emerging or smaller economy (USD/TRY, USD/ZAR) and carry the widest spreads and highest overnight financing costs.
Understanding pair notation matters for position sizing and pip-value calculation. Pip value differs depending on whether USD is the quote currency (EUR/USD: straightforward USD pip value) or the base currency (USD/JPY: pip value must be converted back to USD). Most platforms handle this automatically, but traders should verify pip values when calculating risk on unfamiliar pairs.