* Nikkei cuts two days of losses but gains seen limited
* Stable dlr/yen helps, but Fed Nov meeting awaited-analyst
* Bullish earnings help confidence; Kao, Fuji Heavy up
* Tech firms' earnings begin this week, profit seen patchy
By Aiko Hayashi
TOKYO, Oct 27 (Reuters) - Japan's Nikkei average rose 0.7 percent on Wednesday after two days of losses, helped by short-covering on a halt in the yen's advance against the dollar, with solid earnings reported so far helping boost investor confidence.
But analysts expect gains to be kept in check as the market heads into the peak of the earnings season, with Canon Inc set to open the technology sector's reporting later in the day.
"Short-covering of stocks emerged on stabilising currency moves, which was helped by views that the Federal Reserve's expected easing may not be as big as has been expected due to factors such as solid U.S. earnings," said Fumiyuki Nakanishi, a manager at SMBC Friend Securities.
"Still, the market is unlikely to find a clear direction until the Fed's Nov. 2-3 meeting. Dealers are also finding it hard to actively take positions eyeing the month-end, as are institutional investors, because we're in the midst of the earnings season."
By the midday break, the benchmark Nikkei was up 64.36 points at 9,441.74, after having slipped 0.5 percent this week. The broader Topix added 0.5 percent to 821.63.
Japanese stocks have faced pressure from the yen, which firmed to a fresh 15-year peak of 80.41 against the dollar on Monday, approaching a record high of 79.75 yen. In early Asia trade, the yen changed hands at 81.64 to the dollar.
The Nikkei's support likely stands at last week's intraday lows around 9,310-9,320, with the upper level of its daily Ichimoku cloud near 9,300 also seen as key technical support.
Some technical resistance is seen at the 25-day average, now at 9,490.
Japan's electronics firms are expected to show a patchy recovery for July-September from last year's weak results, but even strong performers will likely leave their full-year forecasts unchanged as concerns mount over the strong yen and disappointing demand for TVs.
Canon is expected to show a nearly 50 percent jump in operating profit year-on-year to 89.5 billion yen, on healthy camera sales and cost-cutting.
Canon, which is set to report results after the market close, was down 1.6 percent at 3,645 yen.
For a PREVIEW of electronics firms' earnings see
EARNINGS BOOST
Shares of other companies that have already reported bullish earnings prospects found favour.
Kao Corp jumped 3.7 percent to 2,078 yen after the household goods maker raised its operating profit forecast to 105 billion yen from 97 billion yen for the year to March. Kao posted a 27 percent rise in April-September operating profit to 57.87 billion yen.
Fuji Heavy Industries Ltd surged 6.8 percent to 563 yen after it lifted its operating profit estimate for the six months ended on Sept. 30 by 63 percent after the market closed on Tuesday.
The maker of Subaru cars attributed the revision to stronger-than-expected sales in Japan and North America and deeper cost cuts.
Sumitomo Heavy Industries Ltd shot up 5.4 percent to 467 yen after the shipbuilder more than doubled its half-year net profit estimate thanks to bigger excavator sales and cost-cutting.
Mitsubishi Corp gained 1.3 percent to 1,998 yen after the Nikkei business daily said the trading firm's net profit likely jumped 89 percent on the year to around 260 billion yen in the April-September first half, thanks to strength in energy and mineral operations.
Exporters rose, with TDK Corp up 2.5 percent at 4,710 yen and Tokyo Electron Ltd rising 1.2 percent to 4,830 yen.
Toyota Motor Corp gained 1.9 percent to 2,920 yen and Honda Motor Co also climbed 1.9 percent, to 2,959 yen.
Analysts have said Japanese carmakers are hurting from a stronger yen but will likely manage big cost reductions and have enough of a profit cushion from the first half to warrant an upward revision to their conservative annual guidance.
For a PREVIEW of auto earnings, see
"Expectations are growing that exporter companies may not necessarily have to revise down their earnings forecasts even if they end up lowering their dollar/yen assumption rates," said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets. (Editing by Michael Watson and Chris Gallagher)