FOREX-Dollar takes a breather, Aussie shaky near 3-1/2-year low
* Dollar pauses, market awaits fresh cues
* Aussie near lows in wake of disappointing local jobs data
* China data on Monday next major test for Aussie
* Pound awaits UK retail sales data
TOKYO, Jan 17 (Reuters) - The U.S. dollar faded a little on Friday after a mixed bag of U.S. economic data, while the Australian dollar was vulnerable after disappointing jobs figures the previous day knocked it below an important support level to a 3-1/2-year low.
The Australian currency, sometimes used as a proxy for bets on the Chinese economy because of Australia's dependence on raw materials exports to China, could remain at centre stage ahead of a slew of Chinese data on Monday.
Speculators have been building bets against the Aussie in recent sessions as more fluid currencies, such as the euro and the yen, confine themselves to a holding pattern without a clear short-term trend.
The Aussie slipped 0.2 percent from late U.S. levels to $0.8804, having slumped more than 1 percent on Thursday to as low as $0.8777 - a low not seen since August 2010.
The Australian dollar's outlook has worsened as it has broken below key support from its triple bottom around $0.8850, and traders say the currency is at risk of falling below major support levels against other currencies as well.
The Aussie fell 0.2 percent to 91.78 yen, edging near its December low just above 91 yen, while the euro stood at A$1.5460, within sight of a three-year high near $1.56 hit in late December.
The drubbing came after a surprise drop in Australian payrolls rekindled speculation about another cut in interest rates by the Reserve Bank of Australia.
The Aussie had better luck only against the kiwi, which fell 0.7 percent against the U.S. dollar to $0.8292.
Yet ironically the kiwi's underperformance was due largely to profit-taking in short Aussie/kiwi plays - bets that the kiwi will outperform.
The Aussie has fallen 16 percent from a peak against the kiwi last March to an eight-year low of NZ$1.0534 on Thursday, not far from an all-time low around NZ$1.0420 marked in 2005.
While the Aussie could benefit from short-covering ahead of a long U.S. weekend, its fate hinges largely on a raft of Chinese data due on Monday, including October-December gross domestic product and December industrial output and retail sales.
With much of the market's wrath directed at the Aussie, the other major currencies pretty much traded sideways.
The dollar index was at 80.93, having slipped 0.1 percent overnight. The index is still back to where it was before last week's weak payrolls report sent it crashing.
Providing more evidence that the U.S. jobs figures were probably an exception, data on Thursday showed jobless claims fell in the latest week.
But consumer inflation was tame, giving the Federal Reserve leeway to keep an easy policy while disappointing earnings from Goldman Sachs and other banks sapped risk appetite.
Against the yen, the greenback eased to 104.27 yen from Thursday's one-week peak of 104.925 but stood still well within its familiar range between 104 and 105.
The euro fetched $1.3617, with no sign of breaking out of its $1.3550-$1.3700 range in the past weeks.
Sterling, however, was softer at $1.6340 after hitting a one-month low of $1.6316 on Thursday.
The pound is struggling to extend gains given that a lot of good news about the economy has already been priced in, traders said.
UK retail sales data due out later on Friday will offer more clues on how the British economy, a bright spot in Europe, is travelling.