* Poor jobs data reawakens chance of rate cut
* Aussie hits 8-yr low vs New Zealand dollar
* Investors look to U.S. CPI data for dollar direction
By Laurence Fletcher
LONDON, Jan 16 (Reuters) - The Australian dollar tumbled to its lowest level since mid-2010 against the U.S. dollar on Thursday after a surprise fall in employment reawakened the possibility of another cut in interest rates.
The Aussie fell as low as $0.8777, and was last 1.5 percent lower at $0.8782. One trader said its next target to the downside would be $0.8770, which it hit in August 2010.
Trading volumes in the pair were very high, with investors looking ahead to U.S. inflation and jobless claims numbers later on Thursday for clues as to how fast the Federal Reserve may cut back its huge bond-buying programme.
The Aussie was also 1.1 percent down versus the New Zealand dollar at NZ$1.0571, its lowest since the end of 2005, with talk among traders of selling by large hedge funds.
Australian employers shed jobs at the fastest pace in nine months in December, with full-time positions hit particularly hard, contrary to economists' expectations of modest job gains .
Investors reacted by reviving talk of another cut in interest rates from the Reserve Bank of Australia, which has been signalling it would rather not ease again from the current record low of 2.5 percent.
"The Australian dollar has had a honeymoon for the first two weeks of the year, but now it's more reflecting the risks on the domestic side," said FxPro's head of research Simon Smith.
"Aussie/Kiwi is one of the few currency (pairs) when there's proper divergence play on rates (for investors to bet on)."
He believes another Australian rate cut could help push the Aussie down to between parity and NZ$1.05, although he does not expect parity to be reached.
The Aussie has been a big target for manager-driven hedge funds, notably CQS founder Michael Hintze, who have focused on central bank governor Glenn Stevens' wish for the currency to weaken, as well as signs of weakening demand for its natural resources.
Computer-driven hedge funds, meanwhile, have also latched onto the currency's slide.
Richard Perry, analyst at Hantec Markets, said that while technical factors suggest there could be a small bounce in the Aussie, it could meet resistance between $0.8820 and $0.8863.
"I'd be using that technical rally as a chance to sell. It does not look good," he said.
The euro was edged up against the dollar to $1.3605, although the greenback has gained in recent days, helped by rises in U.S. retail sales and core spending.
That has nurtured hopes that Friday's non-farm payroll number - which shocked markets with a reading well below forecasts - was an anomaly and did not signal the economy had lost steam at the end of last year.
"A strong inflation print may encourage the Federal Open Market Committee to take a more aggressive approach in normalising monetary policy as the central bank sees a more robust recovery in 2014," said David Song, analyst at DailyFX.
The dollar was up marginally against the yen at 104.55 yen , a little way off a five-year peak of 105.45 yen scaled at the start of the year.
The dollar slipped 0.1 percent against the Canadian dollar to C$1.0925, but was not far off a four-year high of C$1.0992 hit on Wednesday.
Also helping the U.S. dollar, Chicago Fed President Charles Evans, an outspoken dove, said he backed a continued wind-down of Fed stimulus and could even see bigger cuts to the programme if the economy strengthens.
"Foreign exchange markets are finally moving in the relevant direction," said Neil Jones, head of hedge fund FX sales at Mizuho, pointing to potential further stimulus by central banks in Australia and Japan, while the Federal Reserve and Bank of England move in the opposite direction. "I continue to suggest to clients to buy the dollar and the pound and sell the Australian dollar, Canadian dollar and the yen."