Forex Liquidity means the degree to which a currency can be bought or sold in the forex market without affecting the the quoted currency's price. As forex market is an Over The Counter (OTC) Market (which you are not dealing directly with the exchanges), the complexity would means how possible your broker obtain enough relationship with multiple banks that facilitate the buy and sell volume requested by the clients.
The limited liqudity by certain broker will therefore causes the order rejections and slippage. A high level of trading activities contributes to high liquidity - this is especially working well with Electronic Communication Network (ECN) forex brokers. In a high liquidity forex market, a currency can easily be bought or sold, therefore terms as liquid currency.
In forex market, a highly liquid currency usually referring to the major currencies such as USD, EUR, GBP, CHF, JPY, AUD, NZD, CAD which form the currency pairs. The highly liquid currencies also allow you to convert an asset (open position in market) to cash (close an order) quickly, therefore you have less worries of your assets depreciating in value when the market go against you, but you could not find a buyer or seller to close the deal.
Hence many traders prefer to trade the highly liquid currency pairs such as the EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, EUR/JPY, GBP/JPY, EUR/GBP etc. These currency also have a lower spread compare to the less liquid currencies / exotic currencies pairs such as USD/AED, USD/ARS, USD/BRL, USD/CLP, USD/CNY, USD/CZK, USD/EGP, USD/HKD, USD/HUF etc.