Nov 3 (Reuters) -U.S. cotton futures steadied on Friday as a retreat in the dollar offset pressure from technical selling by speculators, but prices stayed on course for a weekly decline.

* The cotton contract for December CTz3 was nearly unchanged at 79.78 cents per lb at 12:22 p.m. EDT (1622 GMT).

* The dollar index .DXY lost 1%, making cotton less expensive for overseas buyers. USD/

* But bearish factors, including persistent concerns over demand for the natural fiber, still put cotton on course for a 5% weekly decline, despite an uptick on Thursday driven by healthy weekly export sales numbers.

* "The December cotton has kind out of run out of time. Speculators are cutting their long positions based on the trading behavior," said Keith Brown, principal at cotton broker Keith Brown and Co in Georgia.

* In the week to Oct. 24, speculators more than halved their net long position in ICE cotton futures, data from the Commodity Futures Trading Commission (CFTC) showed. CFTC/

* "The market is 20% fundamentals and 80% psychological. It is like maybe I want to buy cotton, but if prices can't get over 80 cents after a good export sales report, then I don't want to buy it," Brown added.

* The U.S. Department of Agriculture's (USDA) weekly export sales report on Thursday showed net sales of 457,100 running bales in the week ended Oct. 26, their highest level for the marketing year 2023/2024. Increases were primarily for China.EXP/COT

* "Compared to history, demand this year is very average. But yesterday's report was a surprise, good to see China come back," said Rogers Varner, president of Varner Brokerage in Cleveland.

* Elsewhere, Chicago soybean futures headed for a fourth consecutive weekly gain on China demand hopes. GRA/

Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Krishna Chandra Eluri