Firstly, go up the ladder and into the forest at the north. This is the forest in Cloud’s dream. Go north a screen and stand still in the middle (go north a bit). You’ll see a red materia appear every now and then. When it appears, try to take it and you’ll get the Summon Kjata materia. Go back to the excavator’s site, and talk to the man by the rib cage. Pick the top option twice to start a dig for the Lunar Harp, which you will need to go through the forest.
Go to the upper ledge and place five diggers in a circle facing the smoke, to the southwest of the tent. When you are done, ignite the bomb and place the dig point where the diggers are looking. The next day, check the chest by the entrance and you should find the Lunar Harp. If not, keep trying and replace the dig point. If you have it, go into the forest and head north twice. The Sleeping Forest will awaken and you can now to go north to a rocky area. Go past the red coral and under the tree trunk to get the Water Ring in the chest. Go back to the coral and go up the stairs to the left. Go through the tree trunk and head north. Go along the curving path and head southeast. You’ll be back on the World Map. Head north and enter the round blue object.