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FOREX-German Ifo data takes centre stage for embattled euro

* Euro off 8-month low but longer-term view still bearish

* Upbeat U.S. employment data supports dollar vs yen

* Japan CPI as expected, muted reaction from dollar/yen (Updates prices, adds new quotes, changes dateline from previous TOKYO)

By Patrick Graham

LONDON, July 25 (Reuters) - Germany's influential Ifo survey of business sentiment looked set to determine the euro's path at the end of a week marked by a steady upwards push for the dollar that could herald a long-forecast break higher.

In early European trade, the euro was virtually unchanged at $1.3461, having recovered from eight-month lows around $1.3438 on Thursday.

The Ifo numbers are among the most watched forward-looking indicators of growth in the euro zone's largest member economy. Both its main indicators are expected to inch lower compared to a month ago.

"I hear more and more people going short of the euro," said one London-based dealer. "But we have been here a number of times before and the bottom line is that, again, the euro has recovered a bit overnight. Ifo might be the key today."

Leading banks have been forecasting a decisive break higher by the dollar against the single currency since early this year but have been frustrated by lukewarm U.S. data and yield-seeking investment flows into European stocks and bonds.

But U.S. economic numbers have finally shown some more consistency in the past couple of months and the slightest hints of a more hawkish tone from Federal Reserve chief Janet Yellen have proven triggers for a jerk higher in the dollar.

A number of analysts say that may be the start of something bigger, although there is still caution out there.

"Really, one could feel sentiment among the dealers turn against the euro sometime in May and my feeling is that may finally now be coming through," said Jane Foley, a strategist with Rabobank in London.

"I did have $1.35 for the end of this year, and obviously we have broken through that now. If it is still there in two weeks then I will think about revising that down a little."

The essence of the argument against the euro is a poorer economic outlook that many argue will force the European Central Bank to take more steps - potentially the outright money-printing resisted so strongly to date by German policymakers.

The Ifo numbers are published at 0800 GMT.


The dollar was little changed at 101.76 yen after gaining more than 0.3 percent overnight to a two-week high of 101.86 after weekly U.S. filings for first-time jobless benefits fell to the lowest level since early 2006.

The greenback, which has been closely tracking U.S. debt yields, was also helped by a rise in yields after the strong employment indicator. It was poised to gain about 0.4 percent on the week against the Japanese currency but lacked the momentum to test the 102.00 threshold.

Market players said selling of yen crosses was a factor capping further advances by the dollar.

"Selling of sterling, Australian dollar and New Zealand dollar against the yen is helping prevent a further rise in dollar/yen. Profit-taking in such yen crosses is a key driver, rather than trades in dollar/yen itself," said Bart Wakabayashi, head of currencies at State Street in Tokyo.

The day's other big number in Europe is British economic growth for the second quarter, forecast at 0.8 percent. Sterling has also had a rough time this week, falling back below $1.70 for the first time in a month.

While there are more doubts about a rally stretching back a full year, unlike the euro the pound has been able to rely on strong support from an improving economy throughout that period.

(Editing by Catherine Evans)