* Euro holds onto strong gains, above 90-moving avg
* Outlook uncertain as EC warns of economic pain
* USD/JPY bid by importers, but struggles above Y80
TOKYO, Feb 24 (Reuters) - The euro hovered at 2-1/2-month highs on Friday, holding on to hefty gains made the day before after data on improving German business sentiment prompted traders to cover their short positions.
The single currency rallied 1 percent a day earlier, spiking well above the Ichimoku cloud on daily charts, and breaching its 90-day moving average after having failed to do so decisively in three attempts this week. "After it broke above some key levels, it looks like the euro's rally still has legs, but I think the momentum will fade as we go into the next week," said Mitul Kotecha, head of global foreign exchange strategy for Credit Agricole (Milan: ACA.MI - news) in Hong Kong.
"The euro will probably stumble ahead of 1.35," he said, pointing to a Dec. 9 high of $1.3460 as next potential resistance.
Chartists also pointed to resistance at $1.3436, the 50 percent retracement of its October-January slide.
The euro on Friday was trading around $1.3372, barely changed from late New York (Frankfurt: A0DKRK - news) levels.
Data on German business sentiment from the Munich-based Ifo think-tank was the trigger for the euro, raising hopes that the German economy is improving and will avoid recession despite the problems facing other euro zone countries.
But the European Commission warned that the 17-nation area is heading into its second recession in three years, clouding the long-term outlook for the common currency.
"Technicals suggest that the euro may gain more in the coming days, but looking at the largely unresolved problems in Europe (Chicago Options: ^REURUSD - news) , would anyone seriously want to go long euro?" said Teppei Ino, a currency analyst at Bank of Mitsubishi Tokyo UFJ.
VICIOUS CYCLE
Many analysts think weak economic fundamentals will force the European Central Bank to pursue a more aggressive accommodative policy for longer than other central banks, adding to the long-term pressure on the single currency.
The ECB next week is expected to lend nearly 500 billion euros to banks, although some forecasts go as high as 1 trillion euros.
Against the yen, the euro popped above 107.00, its highest since early November (Stuttgart: A0Z24E - news) and as much as 10 yen off this year's low of 97.04 yen hit on Jan. 16.
With the euro surprisingly resilient, the greenback nursed Thursday's losses and stayed near a two-week low against a basket of major currencies at 78.68.
The dollar has rallied 5 percent in February against the yen and while importers were seen buying the currency on Friday, boosting it 0.2 percent to 80.13 yen, market participants said the rally's momentum has largely faded.
The greenback has been subdued against the yen since Wednesday, having topped out ahead of a major chart resistance point of 80.42 yen, which is the 50 percent retracement of its fall from its 2011 high to that year's low.
The Australian dollar rose to $1.0740, marking a gain of 0.2 percent on the day, after the Reserve Bank of Australia Governor Glenn Stevens said monetary policy is broadly neutral, stoking speculation the central bank may hold off from cutting interest rates in the coming months.
The Aussie gained more than 1 percent on Thursday in an aggressive rebound from a three-week low just under $1.06. (Additional reporting by Hideyuki Sano; Editing by Edwina Gibbs)
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