USD/CNH has dropped, last trades ~170....>

CHINA YUAN: USD/CNH has dropped, last trades ~170 pips lower at CNH6.9522. The

rate took out the Nov 7 low of CNH6.9527 and threatens to breach the low of Aug

2 at CNH6.9499. A clean break here would open up the Dec 12 low of CNH6.9229.

Bulls would be pleased by a clearance of the 200-DMA at CNH6.9691, which would

bring the psychological CNH7.0 level back into the focus.

- Today's sell-off occurs amid the fading of an earlier risk-off mood, as

participants re-evaluate initial reactions to the escalation in U.S.-Iran

tensions. Press reports suggesting that a team of Chinese trade reps is ready to

ink phase-one trade deal with the U.S. on Jan 15 may be slightly helping

sentiment as well, although nothing really new has emerged on this front in Asia

hours. Global Times cited sources suggesting that phase-one trade deal with the

U.S. could be signed in the near future, but in an op-ed argued that Washington

and Beijing need not rush to sign the pact.

- Monday saw USD/CNH add 30 pips, with the local Caixin PMI survey showing a

bigger than forecast slowdown in the expansion of China's services sector.

- Chinese inflation figures are due on Thursday.