• USD/CNH fades the biggest daily gains in over a week, grinds lower of late.
• China Caixin Services PMI for January dropped below market consensus, prior.
• 100-SMA, weekly support line restricts short-term downside, bulls have a bumpy road to return.

USD/CNH hovers around $6.3620-15 as Chinese traders return from a week-long break on Monday.

The Chinese currency (CNY) pair’s recent weakness ignores softer activity numbers but hopes of easing inflation and chatters surrounding the stronger yuan while paying attention to talks of easing inflation in China.

China’s China Caixin Services PMI dropped to 51.4 in January, versus 52.9 market consensus and 53.1 prior.

Technically, the pair drifts lower between the 200-SMA and 100-SMA, around $6.3645 and $6.3540 respectively.

Also acting as trading filters is a one-week-old descending support line around $6.3470 and a monthly horizontal resistance zone near $6.3760-70.

It should be noted, however, that the USD/CNY buyers remain unconvinced below January’s top surrounding $6.3975 whereas the bears may aim for the multi-month low, marked the previous month around $6.3235, on breaking the $6.3470 support.

USD/CNH: Four-hour chart

Trend: Further weakness expected