* Yen off recent highs, dollar lifts on hopes of brighter Q2
* Aussie hits seven-week lows, eyes on retail sales
By Ian Chua
SYDNEY, May 5 (Reuters) - The yen showed signs of fatigue early on Thursday having taken a step back from recent peaks, while the greenback firmed broadly on some optimism the U.S. economy would bounce back after nearly stalling in the first quarter.
The dollar edged up to 107.11 yen, pulling away from an 18-month trough of 105.55 set on Tuesday. The euro was back at 123.00 yen, off a three-year low of 121.665 plumbed last Friday.
Prime Minister Shinzo Abe on Wednesday warned Japan will act if necessary to weaken the yen, though many believe the bar is high for any market intervention.
Against the dollar, the euro eased to $1.1488, continuing to consolidate after a run-up to an eight-month peak of $1.1616 earlier in the week.
Latest data showed the U.S. services sector expanded in April as new orders and employment accelerated, offering early signs of stronger growth in the second quarter.
The upbeat report was slightly offset by another showing private U.S. employers hired the fewest number of workers in three years in April.
"Markets seem to be at something of a crossroads at present, waiting for clearer signals on whether U.S. activity will bounce back in Q2 or whether the loss of momentum will extend," analysts at ANZ wrote in a note to clients.
Traders said the focus is now on U.S. nonfarm payrolls due on Friday. In the meantime, Australia's retail sales at 0130 GMT and a survey on China's services sector at 0145 GMT could provide markets with a bit of distraction.
Any disappointment in consumer spending might give investors a fresh excuse to sell the Aussie dollar, which has been under pressure since the Reserve Bank of Australia cut interest rates to an all-time low.
The Aussie was hovering just above a seven-week trough of $0.7447, having fallen nearly three percent since Tuesday's rate cut.
Japanese financial markets remain shut for the Golden Week holiday and will reopen on Friday.
(Editing by Shri Navaratnam)