Tokyo rubber bounces from low

Tokyo rubber futures rebounded on Tuesday after falling sharply on profit-taking in early trade as strong Technicals induced bargain-hunting, with growing wariness over supplies providing additional support.
Tokyo traders, however, were unconvinced about the long-term outlook given bearish fundamentals for rubber, as many domestic end-users were believed to be holding sufficient stocks.
Traders were also doubtful whether an actual reduction in production by key producers would take place. "Charts look very good, while there are no distinct fundamental reasons to back them up," said Hisaaki Tasaka, a market analyst at Ace Koeki.
Underlying short-term technical sentiment was bullish after the key Tokyo Commodity Exchange rubber for the May delivery surged nearly 15 percent in the last week, reaching a new one-month high of 218.6 yen a gram in trade. May TOCOM rubber ended the session up 2.0 yen or 0.9 percent at 218.3 yen a kg from Monday's close of 216.3 yen.
The key contract briefly touched a session low of 212.5 yen, but it gathered strong bids near the low. Traders were watching whether the key contract could break through a chart point of 220 yen the level last reached on November 2 but said a failure to reach that level in the near term could spur another round of profit-taking. Further major resistance is seen at the 100-day moving average of around 231-yen.
"Looking at the current technical trend, I wouldn't be surprised if it extended gains to around 230-240 yen in the near term," Tasaka said. Speculative buying has intensified as uncertainty about potential supplies grew after last week's announcements by Thailand and Indonesia, the world's No 1 and No 2 rubber producers, that they could cut exports.
Thailand said it could suspend exports for a few weeks this month to help prices, and Indonesia said it would cut exports by 10 percent next year. Many Japanese traders were doubtful whether an actual reduction in production would take place. "I'm also doubtful about the possibility of seeing an actual production cuts," Tasaka added. Market bears were also concerned that prices could tumble around the time of the expiration of the December TOCOM contract on December 22 if a large volume of deliveries would be made on the day. Asian physical rubber prices were mostly unchanged on Tuesday.