Understanding of Currency Pairs

This chart shows recent price history of the EUR/USD cross. This shows time on the horizontal axis and price (exchange rate) on the vertical axis

The current exchange rate is shown in red, at 1.2734

The current exchange rate is the spot rate.
This means that one EURO can buy 1.2734 United States Dollars at this moment in time. The aim is buy low and sell high. Or sell out before the price drops, then buy it back when it is cheaper (at a lower price)

Buys and sells are sigualled in terms of the base currency. The base currency is the first currency that is named in the currency cross. the EURO is the base currency in the NZD / USD currency cross, the kiwi Dollar is the base currency in the NZD / USD cross.
Ideally We'd sell a point X and buy back at point Y.



With this case we would SELL EUROS at point X, and BUY Euros at point Y. This is we sell high and buy low.

If we were to sell out at X we'd receive 1.2745. If we buy back at Y it would cost us less approx. 1.2720. This trade profited a 0.2% gain.

If it gets confusing. try thinking of the currency cross A/B. Where A can represent any currency, and B can represent any currency other than A. You are buying or selling currency A.

-If the exchange rate is moving up, you want to buy low and sell high. So you will buy A to sell A later at higher rate.
-If the exchange rate is falling, you want to sell now, to buy it back at later time.
(This is the case shown in the graph)