At its heart, technical analysis represents the study of price trends (or anticipated trends). In price terms, at their most basic, these can be divided into uptrends and downtrends. Within such trends, we see points where little price action occurs and conversely other points reflecting substantial price action and market tension. The idea behind support and resistance is that if the price action fails to exceed a certain level, then that level becomes important. Thus, if a price fails to exceed a high and falls back, we call that high a resistance. Equally, if the price action fails to get below a low price level, then that low price level becomes support. Price trends reflecting a number of support and resistance levels are reflected by trend-lines.
Resistance or support can be formed around such a trend-line. From this, we can say that it has broken trend-line resistance. Thus, we can describe support and resistance levels as levels where a trend may be interrupted or reversed. Because such levels can determine the continuation or the cessation of a trend, they are seen as important by market participants. In this example, market participants may well have left stop loss orders to buy Euro and sell dollars above the trend-line resistance on the view that if such a level broke it would signal a short-term end to the downtrend. Of course, if enough people leave orders to buy (sell) above (below) trend-line resistance (support), then the reversal of the previous trend could well be accelerated. Furthermore, speculative elements could discover such orders and try to target them in order to cause what might become a self-fulfilling move, allowing for potential profits.
To identify support and resistance levels, technical analysts use a variety of information inputs, including but not exclusive to chart analysis and numerical rules based on previous price performance. The rule with support and resistance is that they are important until they are broken. This may seem like just stating the obvious, but the key thing to note is that there is no particular time limit to their importance.