13.3 Foreign Exchange

Foreign exchange closes Section Nine: Comparative Market Analysis in the 2026 Program Guide. Equities, indexes, bonds, futures, and ETPs are already on the table. This unit is the spot currency market: how a pair is quoted, which pairs are majors versus crosses, what a dealer / OTC structure does to technical analysis, and what data actually sit under a currency chart. It remains Cross-asset Analysis inside Advanced Techniques (26% of CMT Level I—the 132-question, 2-hour sitting). Independent OpenExamPrep teaching for these CMT Level I FX topics is not a CMT Association publication and does not claim partnership with the Association. Independent CMT Level I practice by OpenExamPrep is at /practice/cmt.

Currency futures (size, ticks, expiry, margin, open interest) were 13.1. This section is why a EUR/USD spot pane does not behave like IBM and why "volume" on that pane is usually a proxy. Digital assets are the next chapter; do not import on-chain data here.

Base versus quote in a pair

Spot FX is quoted as CCY1/CCY2 (also written CCY1CCY2). CCY1 is the base currency—the unit being priced, conventionally one unit. CCY2 is the quote currency (counter currency)—the currency in which that price is expressed.

EUR/USD at 1.1000 means one euro costs 1.1000 U.S. dollars. EUR is base; USD is quote. If the pair rises to 1.1100, the euro strengthened (it buys more dollars) and the dollar weakened versus the euro. If the pair falls, the base weakened versus the quote.

The same logic with USD as base: USD/JPY at 150.00 means one dollar costs 150 yen. A rise to 151.50 means the dollar strengthened versus the yen. Students who memorized "up is always dollar-bearish" fail this stem. Up is always base-bullish.

A pip is the conventional smallest increment in the quote: typically 0.0001 for most pairs and 0.01 for JPY pairs. Many platforms now show a tenth of a pip (a pipette). A move from 1.1000 to 1.1100 is 100 pips on EUR/USD, not "100 dollars" and not 1,000 pips unless the stem uses a different convention.

Inversion. If you only have USD/JPY and you need yen per some other convention, invert carefully: 1 / 150.00 ≈ 0.006667 USD per JPY. Mixing inverted series with the listed pair without restating the scale is a charting error, not a new market.

Exam trap: treating the second currency as the base because "we think in dollars." In EUR/USD the dollar is the quote. In USD/JPY the dollar is the base. Read the order.

Majors versus crosses

Majors are the most liquid pairs that include the U.S. dollar. The usual Level I list is:

• EUR/USD (euro)
• USD/JPY (yen)
• GBP/USD (sterling; sometimes called "cable")
• USD/CHF (Swiss franc)
• AUD/USD (Australian dollar)
• USD/CAD (Canadian dollar)
• NZD/USD (New Zealand dollar)

AUD, CAD, and NZD are often nicknamed commodity currencies because of resource trade, but they are still majors when paired with USD. Some desks call only EUR, JPY, GBP, and CHF the "big" majors and the rest G10. If a stem says majors, answer USD pairs, not "any liquid pair."

Crosses (cross rates) are pairs that do not include USD: EUR/JPY, EUR/GBP, GBP/JPY, AUD/NZD, EUR/CHF, and so on. Economically a cross is still two majors versus the dollar multiplied together (EUR/JPY ≈ EUR/USD × USD/JPY), and interbank desks still use that identity. On the chart, the cross is its own series with its own sessions and gaps.

Exotics (emerging-market pairs such as USD/MXN or USD/TRY) are a third informal bucket: wider spreads, more event gaps, sometimes non-deliverable forwards instead of a deep spot market. Level I's required split is majors vs crosses. Name exotics only if the stem leaves the G10.

Exam trap: calling EUR/JPY a major because it is liquid. Liquidity does not put USD in the pair. EUR/JPY is a cross.

Dealer-market / OTC structure and what it does to technical analysis

Listed stocks have an exchange tape, an official close, and consolidated share volume. Spot FX is not that market. It is a dealer market conducted largely over the counter (OTC): banks and platforms quote bid/ask, internalize flow, and match with other dealers. Electronic brokers exist, but there is no single exchange whose prints are the world's EUR/USD volume.

24-hour weekdays

The spot week runs around the clock from the Asia open through London into New York, then back to Asia, until Friday evening. There is no 9:30–16:00 exclusive session. Liquidity clusters:

• Asia (Tokyo and regional centers): often important for JPY and AUD.
• London: typically the deepest G10 session; overlaps with Asia in the morning and with New York in the afternoon.
• New York: U.S. data and the London overlap; thinning into the U.S. afternoon.

A "daily" FX candle is a vendor session definition (often 17:00 New York to 17:00 next day, or a similar roll). Two platforms can disagree on the daily open if they roll at different hours. That is a data choice, not a second market.

No single-exchange volume

There is no NYSE-style consolidated volume for global spot EUR/USD. A histogram labeled "volume" on a spot chart is usually:

• that platform's transacted size, or
• a tick count (how many times the quote changed), or
• volume from a related future plotted under the spot pane.

None of those is "world FX volume." Classical volume-confirmation rules still have a use if you know which proxy you are on. They fail if you treat a retail platform's histogram as the entire interbank market.

Weekend gaps

Spot desks effectively stop over the weekend. Prices reopen Sunday evening New York time / Monday morning Asia. News, geopolitics, and policy over those hours can gap the pair. That gap is a real discontinuity in the 24-hour tape, unlike a stock that also gaps from Friday close to Monday open but did so from a consolidated auction close. FX weekend gaps are a reason technicians mark Friday's last dealer range and the reopen, and why stop placement that assumes continuous 24/7 prints is naive.

Holiday thins (Tokyo when London is open, or U.S. half-days) create session illiquidity inside the week as well.

Other TA consequences

• No specialist close. Benchmarks such as the WM/Refinitiv 4:00 p.m. London fix exist for valuation. They can print a burst of activity. They are not "the official close of EUR/USD" in the S&P 500 cash-index sense.
• Fragmented quotes. A spot mid from one aggregator's contributors can differ by a pip from another's. Trendlines at the pip level can be vendor-specific.
• Dealer inventory. Widening spreads into events are microstructure, not always a classical reversal candle.

Exam trap: demanding share volume before you will apply technical analysis to FX. The unit's point is that TA is still used, but volume is a proxy and time is 24-hour with a weekend hole.

Data used in currency charts

Know what the pane is, then interpret it.

Spot mid. Most textbooks and web charts of "EURUSD" are a mid from a data vendor. OHLC are the mid's open, high, low, and last in that vendor's session. Spreads are not in the candle unless you plot bid and ask separately. For higher-time-frame trend work the mid is usually enough. For a 5-pip scalp it is not.

Futures. Euro FX, yen, sterling, and other CME currency futures have a multiplier, a tick value, an expiry, margin, and open interest—all of 13.1. Many technicians plot the future when they want a volume-based method (on-balance volume, VWAP, volume spikes) because the exchange does publish contract volume. Basis (future versus spot) exists: the future is not required to equal the spot mid. Into expiry, a deliverable FX future is tied to the currency market by delivery mechanics; until then, treat it as a related series, not as identical to spot.

Tick volume proxies. When true volume is missing, platforms count ticks (quote updates or last-deal updates). A burst of ticks often coincides with news and the London/New York overlap. A dead tick histogram into a breakout is a weak-participation warning on that feed. It is not proof that Tokyo did not transact at a bank that never hit your vendor.

What not to treat as world volume. One broker's "volume," an ETF's share volume, or the future's volume alone as if it were BIS-survey global turnover. The BIS Triennial Central Bank Survey estimates global FX turnover; it is a research benchmark, not a daily histogram you plot under the candle.

Exam habits. If a stem shows EUR/USD at 1.10, name EUR base, USD quote, and what a rise means. If it asks majors versus crosses, put USD in the majors and no USD in the crosses. If it asks why FX TA differs from stocks, say 24-hour dealer market, no single-exchange volume, weekend gaps. If it asks what you are plotting, say spot mid, listed FX future, or tick-volume proxy.

Key Takeaways

• Base is first; quote is second; a rise is a stronger base versus the quote
• Majors include USD; crosses do not
• OTC dealer FX is 24-hour on weekdays with no consolidated volume and weekend gaps
• Chart a spot mid, a currency future, or a tick-volume proxy—not world FX volume