TOKYO, Sept 3 (Reuters) - Japan's Nikkei average is likely to edge higher on Friday, extending two previous days of gains, after U.S. data showed improvement in housing and the job market, further calming fears about the pace of global economic recovery.
But gains are set to be capped by investor wariness ahead of closely-watched non-farm payrolls figures due out later on Friday, although market players said this week's slew of fairly positive numbers were raising some hopes that the jobs data would also show improvement.
"Should the jobs data prove bad, this could lead to a further strengthening in the yen, which would definitely prove a headwind for stocks," said Hiroichi Nishi, general manager of equities at Nikko Cordial Securities.
"But a lot of this week's indicators, which were expected to be bad, have actually turned out better than expected, and this has eased worries about the economy a bit. There's also the chance the jobs data could be better too."
August non-farm payrolls are forecast to decline by 100,000. In July, they fell 131,000.
Data from the National Association of Realtors showed pending home resales rose unexpectedly in July and a separate report showed new claims for unemployment insurance fell for a second straight week.
The figures came on the heels of strong U.S. manufacturing data on Wednesday that, along with good Chinese manufacturing data and stronger-than-expected growth in Australia, have eased, for now, investor fears about the strength of the economic recovery.
Nikkei futures traded in Chicago closed at 9,110, up 0.8 percent from the Osaka close, and market players said the benchmark Nikkei would trade between 9,000 and 9,200.
The Nikkei closed at 9,062.84 on Thursday, rising further from a 16-month trading low hit the day before.
Tech shares were likely to perform well after their U.S. peers gained on Thursday, market players said. There was also likely to be buying by institutional investors at the lows.
The next targets for the Nikkei will likely be around 9,280 and then 9,360, highs hit in late August, a market analyst said. The Nikkei's 25-day moving average currently comes in at 9,257.
If it resumes falling, the next technical level is 8,697, a 61.8 percent retracement of the rally from its March 2009 low to its April 2010 high.
STOCKS TO WATCH
-- Nidec Corp
Nidec, a Japanese motor manufacturer that is buying two of Emerson Electric's units, said on Thursday it will raise up to $1.18 billion in Japan's largest convertible bond issue in almost two years.
-- JGC Corp
Spanish engineering and renewable energy group Abengoa said on Thursday it has attracted Japanese group JGB corp as a minority investor in two solar mirror-power plants being built in southern Spain.
-- Canon Inc
Canon will create a U.S. subsidiary next spring to provide services to businesses that use its office equipment, with an initial staff of around 100 to 150, the Nikkei business daily said.
-- Panasonic Corp
Panasonic is aiming to grab a 50 percent share of the European 3D television market this year as demand outstrips expectations and the technology wins converts worldwide, its head of Europe said on Thursday. (Reporting by Elaine Lies; Editing by Joseph Radford)