Counter Currency.

A currency pair is the primary instrument used in forex trading. As its name suggests, it consists of two currencies—the base currency and the quote currency.

The counter currency is the second currency in the currency pair, used to determine the value of the base currency. It is sometimes referred to as the counter currency to the quote currency.

For example, in the EUR/JPY quote, it is the Japanese Yen (JPY) that acts as the quote currency, and therefore it is commonly said that one Euro is worth 125 Yen, and not vice versa. In fact, the Yen acts as a counter, determining the value of the base currency.

Most often, foreign currencies act as the second component, while the national currency is the base currency. However, this trend is only observed in domestic interbank markets.

If we consider this concept in relation to Forex trading, the following patterns can be identified:

an upward trend is observed for the currency pair .

• The quote currency appreciates – this process causes a downward trend on Forex.

These two patterns should be kept in mind when forecasting the future trend, since if you focus on changes in the value of the counter currency, it is always inversely proportional to the emerging movement on the Forex chart for the currency pair as a whole.