Tokyo rubber futures closed the lower on Friday as bearish technical trends slashed gains despite the firmness in some commodities such as gold. The benchmark Tokyo Commodity Exchange rubber contract for December delivery closed the down 1.0 yen from Thursday, or 0.4 percent, at 251.4 yen, after rising as high as 255.0 yen.
The trough was 250.7 yen. "It is a market totally driven by technical now," a Tokyo-based broker said. The key TOCOM rubber contract fell as far as 249.4 yen a kg on Thursday, the lowest for any benchmark since January 11. TOCOM rubber remained bearish on the charts, with the key contract slumping below the near-term moving average of 260.7 yen, which is its seven-day average. It also dipped below the 200-day average of 254.1 yen. Market sentiment weakened after the benchmark contract failed to top the key resistance level of 300 yen three times this year.
It is now down more than 15 percent from this year is high of 299.5 yen marked on April 17. Investment funds are now a major force in directing the market, and market participants say their role has grown even larger as the scale of the Tokyo rubber market has shrunk in terms of turnover and volume.
Traders say TOCOM rubber could now test this year's low of 235.8 yen set on January 8. A rubber trader based in Singapore said physical rubber prices were mostly lower in line with TOCOM, but supply tightness was providing some support. He said that although it was typically the season when supplies were relatively abundant, the recent uncertain weather in some producing areas meant that shipments were not as good as expected.
The uncertainty was adding to the volatility in the Tokyo rubber market. Thailand, Malaysia and Indonesia together provide about 60 percent of the world's supply of rubber. The trader added that the Chinese were seeking prompt rubber supplies, but many were sidelined hoping for a fall in physical rubber prices after TOCOM's decline.