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Key Tokyo rubber futures rose to a one-year high near 220 yen per kg on Wednesday before succumbing to profit-taking. Gains in oil and other commodity prices prompted speculative buying, and firmness in the physical rubber market, partly reflecting consistent buying interest by Chinese users, was also supportive.
But the Tokyo market's failure to clear the key 220 yen resistance level, coupled with a firming yen, prompted quick profit-taking. The key Tokyo Commodity Exchange rubber contract for March delivery rose as high as 219.6 yen, up 1 percent from the previous settlement of 217.4 yen. This marked the highest point for any benchmark since October 2008.
But the contract reversed gains to fall 0.3 yen or 0.1 percent to 217.1 yen by 0545 GMT. "Breaking through the 220 yen level would change the market's outlook to being completely bullish. That's the key technical turning point," said a manager at a trading firm in Japan, adding that if this happened, the upside potential would be a widening to 240 yen. But a rise in the yen versus the dollar has undermined investor sentiment for now, traders said.
A higher yen deflates yen-denominated commodities futures prices. A complete halt at around 220-yen would form a double-top on the charts, which typically suggests a bearish technical outlook, the manager said. Thailand, the world's biggest rubber exporter, wants other top producers to help push up prices even as the country plans a big expansion in cultivation.
Thailand also on Tuesday unveiled a plan to cultivate a further 160,000 hectares of rubber plantation by early next year. Passenger car sales in China rose 83.6 percent in September from a year earlier. But government incentives which have boosted sales in recent months could easily be turned off in 2010 if Beijing frets about an overheating economy. Earnings from key US companies are being carefully awaited to gauge the state of the world's biggest oil consumer.

Copyright Reuters, 2009

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