* Yen off recent highs, dollar supported by hopes of brighter Q2

* Aussie edges higher, helped by upbeat Australian data (Updates prices, adds comments)

By Ian Chua and Masayuki Kitano

SYDNEY/SINGAPORE, May 5 (Reuters) - The yen showed signs of fatigue on Thursday after stepping back from recent peaks, while the greenback was supported by optimism the U.S. economy could bounce back after nearly stalling in the first quarter.

The dollar edged up 0.1 percent to 107.13 yen, pulling away from an 18-month trough of 105.55 set on Tuesday. The euro rose to 123.03 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, although many believe the bar is high for any market intervention.

The possibility of currency intervention by Japanese authorities would likely become much higher if the dollar were to fall to 100 yen, said Tan Teck Leng, FX strategist for UBS Wealth Management in Singapore.

In the past, Japanese officials had issued stronger verbal warnings on the yen's rise before intervening, Tan said.

"Ready to act and watching it closely is not yet the final warning," Tan added.

The Australian dollar edged up 0.5 percent to $0.7499 , helped by upbeat Australian data, including a better-than-expected rise in retail sales in March.

The Aussie dollar is still down about 1.4 percent for the week, having tumbled after the Reserve Bank of Australia cut interest rates on Tuesday.

Elsewhere, the euro held steady at $1.1485, 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 now is on U.S. jobs data on Friday.

If U.S. non-farm payrolls show an increase of more than 200,000, that could lend some support to the dollar, said Roy Teo, FX strategist for ABN AMRO Bank in Singapore.

However, a rise in wage growth to at least 2.5 percent year-on-year may be needed to increase the chances of the U.S. Federal Reserve raising interest rates in June, Teo said.

"I would expect any bounce in dollar/yen to around 108 to be met with selling interest," Teo added.