AUD/USD heads back down as Dollar selling evaporates

• The Aussie's Fed-fueled rally ends prematurely, and continues lower against the USD.
• A lack of macro data leaves the pair exposed to broader market sentiment.

The AUD/USD is trading on the low side in the overnight session, testing just beneath the 0.7700 handle.

The Aussie has given up almost all of Wednesday's gains and is back near three-month lows. The Dollar sell-off spurred on by the Fed's rate hike has promptly evaporated as quickly as it started, and the widening interest rate differential between the US Fed and the Reserve Bank of Australia (RBA) is set to take a toll on the AUD in the long-term.

Interest rates to punish the Aussie

Following the Fed's rate hike, the USD's interest rate is now higher than the AUD's for the first time since 2001. The RBA beginning to walk back their future growth projections with RBA Governor Phillip Lowe striking the 3.0% target from the central bank's last policy meeting, and replacing it with "higher than 2017", which clocked in at 2.5%. That small change leaves the RBA looking down the barrel of suppressed interest rates until well into 2019, while the Fed is gearing up for multiple hikes in the coming year. As the rate differential continues to widen the Aussie can expect to continue lower against the Greenback.

With little data left on the docket for the week, the AUD/USD pair heads into Friday's session being led around by market sentiment.

AUD/USD Technicals

As FXStreet's Valeria Bednarik explained earlier today about the AUD/USD's technical stance, "From a technical point of view, the pair is at risk of resuming its decline, as in the 4 hours chart, the price is hovering around a modestly bullish 20 SMA, while technical indicators hover around their mid-lines, lacking clear directional strength. Wednesday's low at 0.7670 is now a key support, with a break below it signaling a steeper decline for this Friday."

Support levels: 0.7700 0.7670 0.7625

Resistance levels: 0.7740 0.7785 0.7410