USD/JPY hits 19-day low despite steepening of US yield curve

• USD/JPY is trading at 19-day lows below 108.70. 
• Yen is drawing bids despite the steepening of the US Treasury yield curve. 
• Markets are offering dollars amid the continued de-escalation of US-China trade tensions. 

USD/JPY is flashing red for the third straight day and is currently trading at 19-day lows near 108.66.

The anti-risk Japanese yen (JPY) is drawing bids despite the US treasury yield curve suggesting a positive outlook for 2020.

The curve, as represented by the spread between the 10- and two-year yield yields, rose to 32 basis points on Monday to hit the highest level since October 2018. The spread had turned negative (inverted yield curve) in August, triggering recession fears. 

The recent steepening could be associated with the optimism generated by a continued de-escalation of the US-China trade tensions. 

The South China Morning Post on Monday reported that the two sides could sign the so-called "phase one" trade deal as early as this week. 

Further, China's Manufacturing PMI printed above 50 for the second month in a row in December, indicating the economy has likely bottomed out

Even so, the yen is pushing higher, possibly due to the broad-based US dollar weakness. The dollar index, which tracks the value of the greenback against majors, has dropped by more than 100 pips in the last four days. 

Technical analysis

The pair is losing altitude, as expected, having faced repeated rejection at the 100-week average resistance. 

At press time, the pair is trading near the sideways channel support on the daily chart. A channel breakdown, if confirmed on a daily closing basis, would open the doors for 107.50 (target as per the measured move method). 

Technical levels