Tokyo rubber futures were on the defensive on Thursday due to bearish Technicals after a plunge of nearly 13 percent since last week forced investment funds to pull out from the commodity. The key Tokyo Commodity Exchange rubber contract for August delivery fell as far as 256.4 yen a kg the lowest for any benchmark since January 15.
"Funds are actively liquidating their positions due to bearish Technicals," said Takashi Ogura, manager of the risk management department at Kanetsu Asset Management. "They are pulling out from risk assets after falls in stocks. It may take a while before investors restore their confidence in rubber," Ogura said. The key contract was at 257.4 yen, down 1.8 yen or 0.69 percent from Wednesday's close of 259.2 yen.
It had dropped by the daily 10-yen limit the previous day. The TOCOM contract briefly reached a high of 261.8 yen but it was capped by profit taking. The rubber contract is expected to find support at the 200-day moving average of around 255-yen. "The 200-day moving average will be the key, but a failure to sustain the level would trigger further liquidation.
The price could fall towards 200 yen," Ogura said. "At the moment, people are not looking at fundamentals, but the market is mainly driven by Technicals." Other traders said, however, rubber should be supported due to concerns over supply tightness during wintering in top producer Thailand, when latex output falls. Physical rubber prices were supported by consistent demand and limited supply, with Thailand in the wintering season and the rainy season in number two producer Indonesia disrupting tapping.
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