* Market disappointed by lack of deal on Greece
* Yen under pressure on speculation of BOJ easing
* RSI puts dollar/yen in overbought territory
* Abe "magic" may run out by U.S. Thanksgiving - analyst
TOKYO, Nov 21 (Reuters) - The euro slid on Wednesday after Greece's international lenders failed to clinch a rescue deal on Greece while the yen dropped to 7-1/2-month lows against the dollar on speculation of more monetary easing in Japan.
After almost 12 straight hours of talks where traders had hoped an agreement to unblock aid funds to Athens may be reached, euro zone finance ministers ended discussion on the next tranche of loans to Greece without agreement.
The euro fell about 0.5 percent to $1.2748, heading towards a two-month low of $1.2661 hit last week and putting its nascent recovery since then at risk.
That low is not far from its levels just before the European Central Bank unveiled its government bond buying scheme in September with an eye on Spain, called Outright Monetary Transactions (OMT).
"The effect of the OMT appears to be wearing thin... I think the euro zone will eventually release the money given that euro zone finance ministers have already agreed on two-year extension of the budget target for Greece. But testing further upside seems difficult for the euro," said Minori Uchida, chief FX strategist at the bank of Tokyo-Mitsubishi UFJ.
Another meeting is now set for next Monday to seek an agreement on how to get the country's debt down to a sustainable level.
On top of the endless saga on Greece, the common currency is also smarting from the spectre of recession in the euro zone and uncertainty over Spain, which has not yet requested financial aid and faces a secessionist threat in a regional election on Sunday in Catalonia.
On the other hand, the Japanese yen was dented by speculation of more aggressive easing by the Bank of Japan as well as poor Japanese exports data.
The dollar rose to as high as 81.975 yen, a level not seen since early April, with its advance blocked by selling related to hedging for an options barrier at 82 yen, though a break there should trigger more short-covering.
It last stood at 81.86 yen, a gain of 0.2 percent from late U.S. levels.
The euro also hit a 6-1/2-month high of 105.065 yen just before disappointing news out of Brussels knocked the common currency down to 104.40 yen, 0.3 percent below its late U.S. levels.
The yen was also undermined by data showing Japan's exports fell more than expected in October, cementing worries the country is in for a recession in the current quarter.
"The data was not just worse than expected but also underscored the poor state of the economy. The yen's downtrend seems pretty solid now," said Katsunori Kitakura, associate general manager of market making at Sumitomo Trust Bank.
The yen has been falling sharply after Prime Minister Yoshihko Noda called an election on Dec. 16 and the main opposition leader, a front-runner to become the next premier, is pushing the Bank of Japan for more aggressive monetary stimulus.
Shinzo Abe, the leader of the Liberal Democratic Party, has put monetary policy at the centre of debate ahead of the election, calling for "unlimited easing", pushing rates below zero, directly underwriting bonds issued to fund public works, and setting an inflation target as high as 3 percent.
While sentiment over the yen is weak, oscillators such as the relative strength index are showing signs the yen may be oversold in the short-term and some analysts say the latest bout of yen weakness may be coming to an end soon.
"Abe now has few other things left to say about monetary policy. It's about the time the power of his magic runs out," said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp, adding that the yen's slide will likely have run its course by the U.S. Thanksgiving holiday on Thursday.