* Euro comes off TWO-year high after below forecast Ifo
* Still on course for gains against a weak dollar
* Chart resistance for euro seen at $1.3833
By Jessica Mortimer
LONDON, Oct 25 (Reuters) - A survey showing German business
morale unexpectedly fell for the first time in six months tipped
the euro off a two-year high against the dollar on Friday.
After sub-forecast euro zone private sector activity surveys
on Thursday, the Ifo data may spark concern about the impact of
a stronger euro on the bloc's exporters.
The euro's fall was not dramatic and it stayed near an
earlier two-year high against a weak dollar. Many analysts say
the euro can rise towards $1.40 as investors seek alternatives
to a dollar hobbled by expectations the U.S. Federal Reserve
will maintain its current level of monetary stimulus.
The euro fell 0.1 percent at $1.3790, below an
earlier high of $1.3833, its strongest since November 2011.
Technical analysts said the euro faced stiff resistance at
Friday's $1.3833 peak - the 61.8 percent retracement of the
currency's fall between May 2011 and July 2012.
"The euro is due for a short-term correction and could drop
towards $1.3720," said Hans Redeker, head of global foreign
exchange strategy at Morgan Stanley. "But by the first week of
December it could be as high as $1.42."
He expected the euro to be one of the main beneficiaries of
a weaker dollar, and as euro zone banks sell assets to foreign
investors to shrink their balance sheets in preparation for the
European Central Bank's Asset Quality Review.
ECB Executive Board member Joerg Asmussen was quoted on
Friday saying the euro zone central bank is not concerned about
the level of the euro, which some traders may see as a green
light to continue buying.
The dollar edged up 0.1 percent against a currency basket to
79.236, off an earlier near nine-month low of 78.998.
There are concerns the U.S. economy may have been hit hard
by the 16-day government shutdown earlier this month, leaving
the Fed reluctant to reduce monetary stimulus any time soon.
"There is still a theme of general dollar weakness and
euro/dollar is more of a dollar story. With disappointing U.S.
data you could see Fed tapering expectations pushed far into
next year," said Lutz Karpowitz, currency strategist at
Commerzbank in Frankfurt.
However, some analysts said the euro could be vulnerable to
signs of the euro zone's tentative recovery losing steam,
especially with the currency's trade-weighted index
at a two-year high.
The dollar held steady at 97.24 yen, off a two-week
low of 96.94 yen, but still below its 200-day moving average, a
key chart level, at 97.34 yen, suggesting room for more falls.