* Euro pauses after reaching 11-month high * Yen firm but weakness to persist on prospects of easing * Investors look ahead to Fed meeting, U.S. GDP, jobs data By Gertrude Chavez-Dreyfuss NEW YORK, Jan 28 (Reuters) - The dollar fell from 2-1/2-year peaks against the yen on Monday as investors consolidated their positions and locked in profits on the greenback's recent rally even as its uptrend is likely to hold given expectations of further monetary easing in Japan. The euro, meanwhile, slid from an 11-month high against the dollar set on Friday, with traders reporting option barriers starting from $1.3480. But analysts said the common currency looked poised for further gains, which could lift it towards the psychologically important $1.35 level, the highest since December 2011. Selling the yen has been a one-way trade since mid-November as investors believed Japanese Prime Minister Shinzo Abe will push the Bank of Japan into more forceful monetary easing to beat deflation. Increasing rhetoric from Japanese authorities that they are open to the dollar rising to the 100 yen level has helped weaken the currency further, raising eyebrows abroad and sparking talk that it is triggering a currency war. In early afternoon trading, the dollar slipped 0.2 percent to 90.70 yen. It had earlier risen as high as 91.25 yen, hitting a 2-1/2 year high for a third consecutive session. "I expect there would be some consolidation around the current level until there is a better sense of the directional movement," said Al Manbeian, managing partner at corporate FX broker GPS Capital Markets in Salt Lake City. "But the trend is for continued yen weakness." He added that the Japanese government may try to moderate its view on the weak yen given the fact that foreign politicians such as German Chancellor Angela Merkel have complained about it. The dollar had briefly recovered against the yen after data showed U.S. durable goods orders rose more than expected in December. But the momentum faded after the release of disappointing data on U.S. pending home sales. The euro fell 0.2 percent to 122 yen, after climbing to a 21-month high of 122.89 yen on Reuters data. Against the dollar, the euro was down 0.1 percent at $1.3451, slipping from an 11-month high of $1.3479 set on Friday. The euro, however, has advanced for a sixth consecutive month versus the dollar for gains of more than 9 percent. Analysts said the outlook for the euro zone improved with the generally positive economic news out of the euro zone, especially from Germany, the largest country in the region. The euro has also benefited from news of euro zone bank repayments to the European Central Bank, suggesting that funding conditions have improved. "The euro has been in a powerful uptrend on the healing optimism for both Europe and the global economy," said Jack Crooks, president and founder of FX investment advisory firm Black Swan Capital in Palm City, Florida. Ahead of the $1.35 level, major resistance for the euro/dollar includes its 2012 high of $1.3486 and the 50 percent retracement from the high in May 2011 to the low in July 2012 at $1.3492, traders said. Data on Friday showed speculators had increased their net long euro positions, while bets for further weakness in the dollar hit its highest since early October. In the options market, traders reported demand for euro calls, which are bets on more gains. The one-month risk reversals traded at 0.1 vols in favor of euro calls, having flipped from puts towards the end of last week. Traders are also looking out for this week's monetary policy decision from the Federal Reserve, although most do not expect any change in the U.S. central bank's dovish stance. The Fed meets on Tuesday and Wednesday. The first estimate of fourth-quarter U.S. economic growth and January payrolls readings are also due this week.