The Canadian set the fastest time in the wet-but-drying FP3 session with a late run on intermediate tyres that put him 0.661s clear of Charles Leclerc's Ferrari, with the second Williams of Alex Albon in third.
It marked the first time a Williams had topped an official timed session at a grand prix since Monza in 2017.
But Latifi, who said he'd hoped the rain would cause disruption to qualifying rather than FP3 after "we saw yesterday we were absolutely nowhere in the dry", was unable to replicate those heroics in qualifying and ended up in 20th position.
He fell at the first hurdle, despite setting a purple first sector, when he lost time in the final corner - thwarting a lap he believed would have been good enough to get him into the fight for Q2.
Albon also was eliminated in Q1 in 17th position.
Asked by Autosport to reflect on his rollercoaster day, Latifi said: "It would have been just on the cusp of Q2, I think the last corner I made a big mistake.
"It is a tailwind into that corner, so I don't know if I had a big gust of tailwind difference to the first lap.
"The first time I had quite nice support from the rear and the second lap I turned in and completely lost it.
"We know our car is still extremely sensitive in that area, arguably more with the new upgrade package.
"It's frustrating to go from... I mean that's literal 'hero to zero'."
Latifi said he had been "pleasantly surprised" to lead FP3, and described it as "a moral victory".
"Even before going P1 I was feeling quite good, I just wasn't able to get a proper lap on the board up until then," he said.
"It wasn't by fluke, everyone was doing lap times at the same times, at the same track conditions, so we're obviously getting something right as a team there.
"And I'm clearly not a bad driver, I mean you still have to drive the car in the wet and it is still very difficult to drive, so it was a nice moral victory for sure, moral boost."
In dry conditions, Latifi said he had accepted it would not be possible to challenge at the sharp end again in qualifying due to the aerodynamic limitations of the FW44.
"We're lacking a lot of downforce, there's no secret about that," he said.
"We're very quick in the straights, and we have all the downforce we have on the car. So we're quick enough because our car is efficient in a straight line, but because we're lacking downforce!
"I was still pretty surprised to hear I had a purple sector one.
"But ultimately at this track all the laptime is done in sector two and three, that's where it's important."
Latifi thinks that Williams has made "a step forward" compared to the Spanish Grand Prix, the last permanent venue where all F1 teams used high downforce set-ups, but believes there is still much progress to make.
"Last time everyone had to put high downforce on a normal track was Barcelona and we were way off, here even with the upgrade package arguably maybe a bit closer because it would have been just around Q2," he said.
"But we're still not where we want to be. It's frustrating, we know where we have to improve, and that's all there is to it."
