Currency Report: The Real Breakout

When it comes to Latin America, currencies are known to tip the hand for equities. 

When LATAM currencies outpace the US Dollar, their bond and equity markets tend to follow suit — often outperforming US benchmarks.

Right now, the Brazilian Real is threatening to break out of a one-year base against the Greenback. 

Here it is, pressing against a key resistance level that’s capped every rally attempt for the past twelve months: 

If BRL can clear the 0.185 level, this breakout should send effects far beyond the FX market.

In Brazil, equities and the local currency move hand in hand — you rarely see strong Brazilian stocks without a strong Real.

And that’s exactly what’s unfolding here: the MSCI Brazil ETF $EWZ is carving out a similar base to BRL, ready to follow the currency higher. 

At the end of the day, a Real breakout is a “risk-on” signal for Brazilian stocks and LATAM more broadly. 

As a commodity currency — linked to oil, metals, and agricultural products — these breakouts often coincide with broad strength across the commodity complex.

But there are also some hot growth stocks in Brazil these days. As one of the booming Emerging Market countries, I’m quite interested in those too.

Leadership is already showing up at the single-stock level. Here are some ways I’m trading the early innings.