USD/JPY above 159 on Fed hike bets: what support and resistance mean

The dollar pushed USD/JPY above 159 yen in the European Central Bank's reference rates for 11 November, as bets on bigger US rate hikes kept building. Investing.com reports the dollar extended its surge to a more than 19-month high on raised Fed rate hike expectations.

In the ECB fixing of 11 November, USD/JPY rose 0.66% to 159.23, from 158.18 the day before. USD/CHF gained even more, up 1.12% to 0.8299. investingLive's Americas wrap says the dollar climbed as stocks rose and oil faded. Earlier, investingLive described USD/JPY as "knocking on the door of 159.00 again" and warned that dollar bulls risk "poking the intervention bear". That makes 159 a useful level for today's lesson. Our sister site has a fuller rundown of the dollar's 19-month high and USD/JPY above 159.

What is support and resistance?

Resistance is a price level where a rising market has stalled before. Sellers tend to appear there, or buyers become cautious. Support is the opposite: a level where a falling market has stopped before, because buyers stepped in.

These levels are often round numbers, such as 159.00, or recent highs and lows. They are not walls. They are zones where traders have reacted in the past and may watch closely again. When a price moves clearly through resistance, traders call it a breakout. Some traders then watch whether the old resistance starts to act as support. This is called role reversal. None of this predicts what will happen. It only describes where attention is concentrated.

A worked example

Here are the last five ECB fixings for USD/JPY:

First, the daily move. 159.23 minus 158.18 equals 1.05 yen. For yen pairs, one pip is 0.01, so that is 105 pips.

Second, the distance from the round number. 159.23 minus 159.00 equals 0.23, or 23 pips above 159. It is the only fixing in the table above 159.

Third, the low of the period. The lowest fixing was 157.95 on 9 November. After that, the pair rose for two fixings in a row. A trader drawing levels on this short series might mark the area just under 158 as a possible support zone, and 159.00 as the resistance that investingLive said the market was testing "again".

The range between those two is 159.23 minus 157.95, or 1.28 yen (128 pips). Remember that fixings are one snapshot per day. Live prices move above and below them during the session, so a chart of live quotes will show a different picture. You can compare on a live USD/JPY chart and the US dollar index chart.

Why it matters for new traders

Levels help you plan. Many traders place exits or limits near support and resistance, so these areas can see sharp moves when they break. In USD/JPY, round numbers also carry extra weight because, as investingLive notes, a rising dollar near these levels raises talk of official intervention to support the yen.

Other forces can override any chart level. Citi sees a risk of yen strengthening if Japanese stocks correct further, according to Investing.com. investingLive also flags Japan's October producer price index, due at 23:50 GMT. Consensus looks for a 0.3% monthly rise and an annual rate of 6.5%, down from 6.8%. Data surprises can push a price through a level quickly.

Key terms

• Support: a price area where falls have stopped before.
• Resistance: a price area where rises have stalled before.
• Breakout: a clear move through support or resistance.
• Role reversal: old resistance acting as support, or the reverse.
• Reference rate (fixing): the ECB's single official rate per business day, not a live quote.