In the forex market, currency trading is always done in currency pairs, such as EUR/USD or USD/JPY. Accordingly, all trades result in the simultaneous buying of one currency and the selling of another. The base currency is the “basis” for the buy or the sell. It is useful to consider the currency pair as an instrument which can be bought or sold. The following are examples of situations that might lead you to choose a particular currency pair to trade:

EUR/USD
If, for example, you think the U.S. economy will continue to fall and that will hurt the USD, you click on BUY, you are buying euros expecting them to go up against the USD. If you click on SELL, you buy U.S. dollars, expecting them to climb against the euro.

USD/JPY
If, for example, you think that the Japanese government is going to weaken the yen in order to help its export industry, you would click on BUY, expecting the U.S. dollar to increase in value against the yen. If you think that Japanese investors are pulling money out of U.S. financial markets and repatriating funds back to Japan, you would click on SELL, expecting the yen to strengthen against the U.S. dollar as Japanese investors sell their assets and convert their dollars to yen.

GBP/USD
If, for example, you think the British economy will continue to be the leading economy among the G7 nations in terms of growth, thus buoying the pound, you would click BUY, expecting the British pound to strengthen against the U.S. dollar. If you believe the British are about to commit themselves to adopting the euro, you would click SELL, expecting the pound to weaken against the dollar as the British devalue their currency in anticipation of merging with the euro.

USD/CHF
If, for example, you think the Swiss franc is overvalued, you would click BUY, expecting the U.S. dollar to strengthen against the Swiss franc. If you believe that due to instability in the Middle East and in U.S. financial markets the dollar will continue to weaken, you would click SELL, expecting the Swiss franc to strengthen against the dollar.

EUR/CHF
If, for example, you think the Swiss government wishes to devalue the currency to help exports in Europe, you would click BUY, expecting the euro to increase in value against the Swiss franc. If inflation started taking off in Germany and France, you would click SELL expecting the Swiss franc to increase in value against a devalued euro.

AUD/USD
If, for example, you think that commodity prices are going to rise dramatically, thus benefiting the AUD, you would click BUY, expecting the aussie to strengthen against the U.S. dollar due to Australia being a leading exporter of many commodities. If you believe that Australia is heading into recession, you would click SELL, expecting the U.S. dollar to strengthen against the AUD.

USD/CAD
If, for example, you think that the U.S. economy is going to rebound while the Canadian economy goes into recession, you would click BUY, expecting the U.S. dollar to strengthen against the Canadian dollar. If you believe the Canadian dollar is fundamentally undervalued and will strengthen against the U.S. dollar, you would click SELL, expecting the CAD to rise against the U.S. dollar.

EUR/GBP
If, for example, you believe the British are about to commit themselves to adopting the euro, you would click BUY, expecting the pound to weaken against the euro as the British devalue their currency in anticipation of the merger. If you believe that Great Britain's economy will grow at a faster rate than Europe's, you would click SELL, expecting the British pound to rise in value against the euro.

EUR/JPY
If, for example, you believe that the Japanese banking crisis will continue to get worse, you would click BUY expecting the euro to rise against the yen. If for example you believe that Europe is going into recession, thus weakening the euro, you would click SELL, expecting the euro to drop in value against the yen.

GBP/JPY
If, for example, you believe that the BOE is going to raise interest rates, you would click BUY, expecting the British pound to increase against the yen due to interest rate arbitrage. If you think the Nikkei index will rise at a higher rate than the FTSE, thus buoying the yen, you would click on SELL, expecting the yen to increase against the British pound.

CHF/JPY
If, for example, you believe conflict in the Middle East may cause a spike in oil prices, you would click BUY, expecting the CHF to increase against the yen due to Japan's reliance on imported oil and the CHF's safe-haven status. If you believe there will be more stability in the region, you would click SELL, expecting the yen to rise against the CHF.

GBP/CHF
If, for example, you believe that the BOE is going to raise interest rates, you would click BUY, expecting the British pound to increase against the CHF due to interest rate arbitrage. If you believe the British are about to commit themselves to adopting the euro, you would click SELL, expecting the pound to weaken against the CHF as the British devalue their currency in anticipation of merging with the euro.

EUR/AUD
If, for example, you believe that Australia is heading into recession, you would click BUY, expecting the euro to strengthen against the AUD. If you think that commodity prices are going to rise dramatically, you would click SELL, expecting the aussie to strengthen against the euro due to Australia being a leading exporter of many commodities.