Currency Report: Latin America Leads The Way

Latin America has been a no-show for well over a decade. 

The last time these countries participated in any meaningful manner was back during the 2003–2008 cycle. 

Since then, this region’s equity markets have done nothing but chop sideways and drag lower. 

But the backdrop is slowly changing, and LatAm equities are emerging as new leaders. We’ve been on this theme for a while, and the strongest signals have come from the currency market.

For months, the big LatAm crosses have been quietly stair-stepping higher versus the US Dollar. This is the kind of action we want to see if we’re buying the stocks in these markets.

This week, Brazil, Mexico, Colombia, and Chile all notched fresh 52-week highs against the buck:

And this strength is translating to the equity markets in a significant manner. 

The Latin America 40 ETF $ILF—think of it as the Dow 30 of LatAm—has carved out a massive, multi-year base and is now pressing on the same $31 shelf that’s capped every rally attempt this decade. 

When we overlay ILF with an equal-weighted basket of those major LatAM FX pairs, you’ll see the same thing: both are pushing to 52-week highs in tandem. 

This is classic intermarket confirmation. 

We want to see these charts complete their reversals and set the path of least resistance higher before having strong conviction on Latin America over longer timeframes.

But for now, that sure looks to be where we’re headed. Here is the ILF breaking a nearly two-decade long downtrend:

For broad exposure, we want to be buyers of ILF on a breakout above 31, targeting 40. Over longer timeframes, any meaningful wave higher would take us back to 60. 

The more important point is that Latin America is finally stepping back into the arena. 

That’s likely to remain the case so long as the currency side of the equation remains cooperative. 

Now let’s take a look at some of the top trades on the sheet from this new leadership area: 

Our first setup is Mexico’s $15B cement giant. This is Cemex $CX: 

Cemex is putting the finishing touches on a massive base nearly 20 years in the making. 

If we’re going to see a meaningful bull run in LatAm equities, expect this one to be a leader. 

We want to be buyers of a breakout above 10.50, targeting 18. 

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