Where does the Canadian dollar go from here?

The $CAD has been rallying hard off the bottom after collapsing to 68 cents US in late Jan.  As the long term chart shows, the $CAD has crashed faster and fallen further than almost anyone would have predicted.  After such a crash, dead cat bounces and the development of subsequent trading ranges are almost inevitable (it's not going to zero nor it is it going to rebound significantly anytime soon).  Fundamentals do not support a strong Canadian dollar nor a strong oil price on which it is heavily dependent.  If history is any guide, both oil and the $CAD will remain depressed for a long time.  Technically speaking, the $CAD is hitting solid overhead resistance around 78 cents.  I suspect an intermediate term trading range develops between 72 and 78 cents for the next several months.

Vanguard Canada Must Own ETFs for Canadian Investors. VUN and VFV.

Vanguard Canada provide the best and cheapest ETFs available to Canadian investors.  Two must have ETFs for Canadian investors are the US Total Stock Market ETF (VUN) and the S&P 500 ETF (VFV).  Both are NOT hedged and provide broad exposure to the US stock market and the US dollar. They are the cheapest ETFs of their kind and have extremely low management expense ratios (MER).  The MER for VUN is 0.15% while the MER for VFV is a category low of 0.08%.

The S&P TSX Composite Index Will See New Highs In The Near Future

After the 1973-74 bear market, the TSE 300 (now the S&P TSX Composite Index) underwent a multiyear period of price consolidation prior to its breakout in 1978.  Do you see the similarities between now and then?  Note how bad the following 1982-83 bear market that succeeded the breakout was.  The early 80s recession was a very difficult time for Canada.

Canadian Real Estate Prices

The above chart nicely illustrates the fact that Canadian real estate prices have appreciated significantly for 10 straight years, correcting briefly during the great recession. As this graph climbs higher, owning a new home becomes increasingly expensive relative to renting. Notice that in 1989, real estate prices peaked and entered a 10 year period of price consolidation during the tech boom of the 1990s. The smart money left the real estate market and went into the stock market -- technology stocks in particular. The smart money left the US real estate market in 2008. The price-to-rent index in Canada can't climb indefinitely. Last summer appears to be a potential top in Canadian real-estate as prices are down markedly this summer in metropolitan areas such as the GTA , Vancouver and Montreal. It is possible that history will simply repeat itself and we may experience a prolonged period of stagnation as the speculators become frustrated with the Canadian housing market.

The more important question is where will the smart money head next?