Currency Report: Chilean Spice

The next big international breakout is lining up. 

In line with the trend we’ve observed all year, the global market isn’t driven by semiconductors or software… instead, it’s all about commodities. 

Chile’s market is a commodity machine, home to some of the world’s deepest copper reserves and a critical lithium supply. 

So, when industrial metals take the lead, Chile tends to follow. 

Here is the MSCI Chile ETF $ECH overlaid with Copper Miners vs. the Equal Weight S&P 500. 

One does not move without the other. In many ways, this is the same trade. 

Right now, both are breaking out in unison, and the timing isn’t a coincidence. 

We’re in a weak-dollar regime, commodities are perking up, and the home currency is finally turning into a tailwind instead of a headwind. 

The Chilean Peso (CLP/USD) has historically been one of the weakest of the major LatAm currencies. 

So the most bullish thing the Chilean Peso has done all year is stop going down against the US Dollar.

This seemingly weak bottoming process is all the confirmation equities needed. 

Now, Chile is jumping to the top of our international relative-strength scans. 

All the ingredients for this trade to work are present: A weak dollar environment, with commodity stocks leading, and the currency starting to cooperate. 

For broad exposure, we’re looking at the MSCI Chile ETF $ECH: 

ECH is pressing against its all-time high AVWAP, which coincides with a structural downtrend resistance line. 

This confluence level marks our line in the sand. 

We want to buy a breakout on strength above 37.25, targeting 56.50. Over longer timeframes, we’re targeting the former highs near 80.  

But we also want to lean into the leaders to express a bullish bet on Chile. 

As for our individual equity exposure, we have three Chilean stocks from different sectors and industries breaking out. 

(If you're not a member of ASC Premium and want access to our favorite Chile trades, join us risk-free.)