May 9 (Reuters) -ICE cotton futures retreated on Thursday despite a weaker dollar and strong weekly export sales data, as caution sets in ahead of a monthly federal demand and supply report.

* Cotton contracts for July CTc1 fell 1 cent, or 1.2%, to 79.05 cents per lb by 12:08 p.m. ET (1608 GMT), after rising as much as 3.3% in the previous session.

* "Overall, the trend of the market remains bearish. We had that rally yesterday because we were a little oversold, and so we're back down today," said Keith Brown, principal at cotton broker Keith Brown and Co. in Georgia.

* "The dollar's down, it wouldn't surprise me if we caught and improved before the day's out. It's an emotional market and it's just displaying those emotions right now," Brown added.

* The dollar weakened against most currencies after economic data showed more signs of softening in the U.S. labor market. USD/

* The U.S. Department of Agriculture's (USDA) weekly export sales report showed net sales of 253,700 running bales (RB) for 2023/2024, up noticeably from the previous week and the prior 4-week average. EXP/COT

* The report also showed exports of 249,600 RB, up 39% from the previous week and up 2% from the prior four-week average.

* Investors focus is now on the U.S. Department of Agriculture's (USDA) monthly World Agriculture Supply and Demand Estimates (WASDE) report on Friday.

* "Rains this week should further improve moisture for cotton germination in West Texas, Coastal Bend, northern and south-eastern Delta, and much of the Southeast," weather forecaster Maxar wrote in a weekly note.

* Meanwhile, in other agricultural markets, Chicago wheat futures rose as Russia declared a state of emergency in key grain-growing regions due to frosts, while corn and soybeans also edged up. GRA/

* Oil prices rose about 1%. Higher oil prices make cotton-substitute polyester more expensive.

Reporting by Anjana Anil in Bengaluru; Editing by Ravi Prakash Kumar