* Euro back above $1.3600 after volatile session
* ECB cuts deposit rate to -0.10 pct, refi rate to 0.15 pct
* U.S. non-farm payrolls next event risk
By Ian Chua
SYDNEY, June 6 (Reuters) - The euro consolidated gains early on Friday, having staged a dramatic rebound from a four-month trough as investors booked profits after the European Central Bank eased policy in a long-anticipated move.
The common currency last traded at $1.3662, after rallying 0.5 percent on Thursday. Momentum could see it test resistance at $1.3688/90 ahead of the closely watched U.S. non-farm payrolls due later in the day.
The euro initially dropped to $1.3503 after the ECB cut interest rates to record lows, taking its deposit rate into negative territory for the first time. It also launched a series of measures to pump money into the sluggish euro zone economy.
But the market, which had long expected action from the ECB, was quick to lock in profits in a move that triggered a squeeze on short positions. That saw the euro roar back to a high of $1.3670.
"For the euro, it was the usual "buy the rumour, sell the fact" story," said Emma Lawson, strategist at National Australia Bank in Sydney.
Lawson said the 'risk on' market the ECB created was dollar negative across the board, allowing not just the euro, but also the New Zealand and Australian dollars to end higher in New York.
Indeed, the kiwi dollar was among the best performing major currencies, rallying 1 percent to $0.8515. It's Aussie peer climbed 0.7 percent to a three-week high of $0.9347.
The rebound in the euro saw the dollar index drop almost 0.4 percent from a four-month peak to 80.347.
Against the yen, the euro hit a 3-1/2 week high just shy of 140.00, while the dollar fell to 102.43 pulling away from a one-month high of 102.80 set earlier in the week.
"Near term, we are worried about a squeeze higher (in the euro), particularly given the currency's propensity to rise after every ECB meeting over the last 12 months," George Saravelos, a strategist at Deutsche Bank in London wrote in a note to clients.
"We would tactically go long EUR/USD looking for a move back to the top-end of this year's range." The euro's 2014 peak was $1.3995 set nearly a month ago.
Other analysts, however, believe the euro could resume its downtrend fairly quickly. Analysts at BNP Paribas recommended selling the euro at $1.3620 to target a move to 1.3200, with a stop at $1.3820.
"EURUSD has squeezed higher after the announcement but we think this is an opportunity to add to shorts," they said.
Traders though doubted much would happen ahead of the influential U.S. jobs data due at 1230 GMT.
Analysts polled by Reuters expect U.S. employers probably added 218,000 jobs in May, a step down from April's 288,000 job gain. But estimates are even wider than usual, ranging from 110,000 all the way to 325,000.
(Editing by Shri Navaratnam)