* Dollar falls versus yen after durable goods report
* Euro trades above $1.3000 but again fails to hold gains
(Updates prices, adds detail)
By Nick Olivari
NEW YORK, July 28 (Reuters) - The U.S. dollar rallied against the euro but slid against the yen on Wednesday as weaker-than-expected U.S. durable goods orders added to fears about economic recovery in the world's largest economy.
Also driving risk aversion was a Federal Reserve report saying overall U.S. economic activity was not increasing robustly and a few areas of the United States had lost steam over the past several weeks.
The Fed's Beige Book summary of national economic conditions, based on information before July 19, pointed to a less-than-booming recovery with sluggish housing markets and weakening sales of costly items like new cars. For details, see [ID:nWALSIE6ES]
"Volume is really light and today people put a lot on durable goods," said Phil Streible, senior market strategist at Lind-Waldcock in Chicago.
He said euro sellers were stepping in at the $1.3000 level on the euro/dollar and there was little buying interest until the $1.2750 level.
"It takes a lot of buying to hold things up but only little buying to see it fall," Streible said.
In late afternoon trading in New York, the euro EUR= traded at $1.2979, down 0.1 percent, with the session peak at $1.3041 and the session low at $1.2968. Investors are still looking for news that could push the single currency out of a recent range after it topped $1.30 for the fifth time this month on Wednesday.
The dollar was 0.5 percent lower at 87.44 yen JPY=. It touched a session low at 87.27.
A report showed new orders for long-lasting U.S. manufactured goods unexpectedly fell for a second straight month in June, their biggest decline since August. [ID:nN28189480]
A string of lackluster economic reports recently has weighed on the greenback. On Friday, the government's first reading on U.S. second quarter GDP is likely to show growth slowed in the period amid a cooling in consumer spending and a wider trade deficit.
"The U.S. data now is the main focus in the forex markets, and it continues to come on the disappointing side," said Amelia Bourdeau, a currency strategist at UBS AG in Stamford, Connecticut.
Investors are lacking "conviction" and trading in major currency pairs will be limited to narrow ranges, she said.
"We are past the good news from Europe on the stress tests and earnings, which helped the euro, and I'm not sure if even the U.S. GDP report on Friday will be able to break that pattern," Bourdeau said.
Friday's report on economic growth is forecast to mark four straight quarters of expansion as the economy digs out of its longest and deepest recession since the 1930s. But the economy continues to run "below its long-run growth potential," said Axel Merk, president and chief investment officer at Merk Investments in Palo Alto, California.
"It may be hazardous to investors' wealth to think this path won't be hazardous to the U.S. dollar," Merk said.
Markets seemed comfortable with euro/dollar around $1.3000, but investors were still wary of opening up new long euro positions that would take it much higher, said BNY Mellon's Michael Woolfolk.
"We came a long way this year, from $1.40 to below $1.20 in the euro, and a lot of that was based on the fear factor. So the retracement has been merely people taking out a lot of those short positions," he added.
Woolfolk said it will take a change in risk sentiment to start a new trend in the pair.
The euro touched an 11-week high against the dollar at $1.3045 on Tuesday, helped by strong bank earnings and gains in European equities, following last week's favorable results of regulatory stress tests. [ID:nLDE66R1B8]
Traders said an option barrier at $1.3050 would need to be taken out for a move toward Fibonacci resistance at $1.3125, which is a 38.2 percent retracement of the December-June move.
(Additional reporting by Steven C. Johnson in New York) (Reporting by Nick Olivari and Vivianne Rodrigues; Editing by Andrew Hay)