* Euro flat after sharp fall, dlr consolidates ahead of NFP
* Euro support seen at $1.3570-$1.3535
* Retreat from ECB rate hike prospect could undermine euro
By Anirban Nag
LONDON, Feb 4 (Reuters) - The euro steadied on Friday, having slid after European Central Bank President Jean-Claude Trichet cooled expectations for a near-term hike in interest rates, while the dollar inched up ahead of key jobs numbers.
Traders said that whether the dollar's reprieve from a recent sell-off and the euro's retreat from a 12-week high will continue hinges on the U.S. job data for January due later in the day.
Economists polled by Reuters see the U.S. economy adding jobs for the fourth straight month in January, up 145,000, though the jobless rate is also likely to rise [ID:nN0366997].
"Our U.S. economics team expects a more positive outcome forecasting 160,000 jobs. Given such a number, we look for a continuation in yesterday's dollar relief-rally with the euro eyeing support at $1.3550," said Adam Myers, senior currency strategist at Credit Agricole.
The euro traded flat at $1.3630
More support lies at $1.3570, this week's low, and $1.3535, which was resistance for the currency last month before a break there turned it into support. A breach of those rates would open the door for a slide below $1.35.
A strong jobs number bodes well for growth in the U.S. economy and an eventual rise in interest rates there -- reducing the prospect of a rise in the disparity between risk premiums for holding euros and dollars.
Trichet, speaking after the ECB's decision to keep rates at a record low 1 percent on Thursday, said inflation expectations remain "firmly anchored" and inflationary pressures over the medium to long term "should remain contained". [ID:nLDE7120I5]
His comments disappointed euro bulls who expected a more hawkish statement after recent inflation data came in above forecasts.
Trichet's comments prompted euro zone interest rate futures
The market will be watching an EU summit later on Friday, although few traders expect anything startling to emerge as measures to reinforce a bailout scheme for struggling member states are not expected to be taken until March. [ID:nLDE7120QB]
READJUSTMENTS AHEAD OF U.S. JOBS
The dollar is drawing support from a recent rise in U.S. bond yields -- and expectations of a strong jobs number added to that trend.
"U.S. bond yields seem about to go above their recent ranges. If they do, that will likely lead to a broad recovery in the dollar," said a trader at a Japanese bank.
But the euro and other currencies seen as higher risk could also benefit from the rise in risk appetite that hopes of stronger U.S. growth bring, especially if the data fails to change the perception that the Federal Reserve is in no real hurry to raise rates.
Fed Chairman Ben Bernanke said on Thursday that despite improved data the U.S. economy needs help from the central bank. [ID:nWAL3DE7Z2]
U.S. short-term interest rates futures suggest traders have raised their expectations that the Fed could increase rates at the end of the year in a bid to keep a lid on inflation.
Bolstering those expectations and the dollar's rebound were reports showing the U.S. services sector grew in January at its fastest pace since August 2005. [ID:nN0682144]
The dollar index was marginally higher at 77.79, having rebounded sharply on Thursday and off a 12-week low of 76.881 <.DXY> <=USD> hit earlier this week.
The dollar was flat against the yen at 81.59 yen
The Aussie dollar
(additional reporting by Hideyuki Sano in Tokyo)
(Editing by Patrick Graham)