The base currency is the first currency in a currency pair and serves as the reference unit for the quoted exchange rate. In the pair EUR/USD, the euro is the base currency.
The quoted price indicates how much of the second currency (the quote currency) is required to purchase one unit of the base currency. For example, if the exchange rate is 1.0850, it means that one euro costs 1.0850 US dollars.
In the global foreign exchange market, the base currency is a key reference point for interpreting prices, position sizes, and profit and loss calculations. It also determines the direction of a trade: going “long” on EUR/USD means buying euros while simultaneously selling US dollars.
