Nowadays, trading algorithms dominate the Forex market. When news comes out, the market reacts virulently because these algorithms buy and sell extremely fast and outrageously quick.
However, the financial order must prevail. To make sure it does, a specific financial language exists, so that the system survives for the next day. Expressions and wordings belong both to central bank members and traders, and here’s a list of the most important notions:
Bullish or Bearish
A trader buys and sells currency pairs based on his/her analysis (technical or fundamental) or belief. If the expectations are that the price will rise, the trader buys, expressing a bullish sentiment. Or, on the other hand, the market is expected to fall, the trader is bearish, so he/she sells.
Long or Short
The way to express a bullish or a bearish sentiment is to address it in the market. Namely, to trade. A bullish trader that buys a currency pair “goes long,” while a bearish one that sells “goes short.” As such, not once you’ll hear traders saying that they went long the pound against the dollar as they’re bullish.
Hawkish or Dovish
A central banker cannot go long or short, or be bullish or bearish because it is forbidden to take part in financial trading. However, a central banker can be hawkish or dovish. To be more exact, the statement of a central bank/banker can be hawkish or dovish. A hawkish statement means bullish, and traders go long. For example, when trading cfds with a Singapore based broker and the Federal Reserve Open Market Committee (FOMC) raises the rates, the statement that comes out is hawkish for the dollar. As such, traders will go long or buy the dollar against every other currency, Singapore Dollar included.
When traders talk to each other or express their opinion about a currency or a currency pair, there’s a particular terminology they use. Here are some nicknames for various currencies or currency pairs around the world:
Traders refer to it as “fiber,” so going long or being bullish on the pair sometimes means simply “buying fiber.”
This currency pair is called “cable,” after the first cable that connected the two major financial centers in the world: London and New York. When traders are “bearish on cable,” it means they sell the GBP against the U.S. Dollar.
The CAD is the Canadian Dollar and is one of the major currencies that make the Forex dashboard. The USDCAD and other CAD pairs are often referred to as “Loonie” pairs, after the nickname for the CAD.
The NZD stands for the New Zealand Dollar, and traders often refer to it as the Kiwi dollar. As such, the NZDUSD pair is the Kiwi pair in Forex trading.
The Australian Dollar has a nickname too: the Aussie Dollar. Traders buy or sell the Aussie pair (AUDUSD) to express their bullish or bearish sentiment.
The central banks around the world meet regularly to set the financial conditions for the period ahead. Their research departments analyze the state of the economy and the decision-making council react. The sum of the tools a central bank deploys represents the monetary policy. At its helms lies the interest rate level.
There are just a few examples designed to show you some of the expressions market participants use. In fact, the jargon extends to every financial markets’ aspect and to every corner too.
The most difficult to understand is the central banking language, as its members choose the wording very carefully. No one wants to disrupt a fragile financial system, and central bankers are the last ones to wish that.
In fact, central banks strive for price stability. It is not the price stability of financial markets they have in their mandate, but price stability regarding inflation seen in the economy. However, both experience fluctuations when wording changes.