Peng has won both their previous meetings. Their last match was in June 2011 on grass. She won in straight sets.
Neither player is in great form. Watson won 2 of her last 10 and Peng won 4 of hers. On hard courts Watson has the better record this year. She won a title in February and reached the 4th round in Miami in March.
Peng reached the 4th round in Melbourne but since then her only success has been in ITF events. She is a former top 15 player and could easily take a set here. Some value on Peng as I expect to see a higher price on Watson. Watson often starts slowly.
Its worth laying the Brit between 1.25 and 1.30. I would expect Watson to eventually get herself into a winning position.