During Friday's Asian session, the USD/CAD pair enters a bullish consolidation phase and oscillates in a narrow trading range just below the mid-1.3500s, or its highest level since June 1 reached the previous day.

After reaching a multi-year high on Thursday, US Treasury bond yields retreat, which discourages US Dollar (USD) bulls from placing fresh bets and acts as a headwind for the USD/CAD pair. However, growing consensus that the Federal Reserve (Fed) will maintain higher interest rates for an extended period of time should limit any meaningful decline in US bond yields and the USD. In fact, the minutes from the July 25-26 FOMC policy meeting, which were released on Wednesday, revealed that policymakers continued to prioritise the fight against inflation, but were divided over the necessity of additional rate increases.

Moreover, the incoming macroeconomic data for the United States indicated an exceptionally resilient economy and bolstered the likelihood of additional Fed policy tightening. In addition, the prevalent risk-off environment provides additional support for the safe-haven dollar and the USD/CAD pair. Evergrande, the second-largest real estate company in China, and Tianji Holdings, a related corporation, filed for bankruptcy in a US court on Thursday. This adds to concerns about China's deteriorating economy, resulting in a further decline in global equity markets.

In addition, concerns that demand will be dampened by headwinds resulting from rapidly rising borrowing costs do not help Crude Oil prices capitalise on the overnight recovery from a two-week low. This, in turn, is believed to weaken the commodity-linked Canadian dollar and suggests that the USD/CAD pair will continue to rise. Consequently, any significant corrective decline may still be viewed as a purchasing opportunity and is likely to be limited in the absence of market-moving economic data from the United States or Canada.

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