A foreign currency exchange rate is made up of two currencies, which create a pair. The conversion rate of the best exchange rates, will let you know how much of one currency you need to purchase another currency. Each currency pair is made up of a base currency and a counter currency. You can easily use an currency converter to determine the value of one currency relative to another.
The history of foreign currency rates, can be viewed on a currency chart, allowing you to see were the currency pair has been over the course of time. By viewing multiple currency charts, you can find how the currency rate todaycompares to the rate of exchange at some period in the past. You can also use a chart to determine periods of support and resistance which can provide you with levels that are advantageous to either buy or sell a currency pair.
Support is a level where demand is apparent. At these conversion rates buyers are willing to step in and purchase theexchange rate. Resistance is a level where supply is prominent. Sellers are constantly looking for resistance levels in an effort to find specific rates where they can short (sell) a currency pair. Many traders will use a moving average to help them determine support or resistance levels. A moving average is an average of a specific number of days, weeks, months or any time horizon you are interested in viewing. When calculating the moving average, you simultaneously drop the first data point when a new price is added to the moving average.
By using a graph of exchange rates you can determine the recent history of a currency pair and determine whether you believe the currency pair is cheap relative to its historical range or expensive, allowing you to determine the most efficient place to either buy or sell a currency pair.