* Prices recover after hitting two-month low
* Spec selling reflected in rising open interest - traders

NEW YORK, Sept 27 (Reuters) - Cotton broke a five-day losing
streak on Thursday on technical buying and short covering after
fiber prices hit two-month lows.
After flirting with the psychologically key 70-cent mark and
hitting its lowest level since Aug. 2 in morning trade, prices
bounced back garnering strength from a recovery in the euro.
New York cotton for December delivery settled up 0.51
cent, or 0.72 percent, at 71.53 cents per lb on ICE Futures U.S.
"This was a short covering rally," said floor trader Gene
Libertucci.
Volumes were healthier than recent averages at 16,635 lots
but still almost a quarter below the 250-day moving average,
with many investors staying on the sidelines waiting to see if
prices test 70 cents which traders said could unleash a fresh
round of spec selling.
Traders expect the gains to be brief before selling resumes
as the Northern Hemisphere harvest begins.
"I think it'll break the 70-cent barrier," said Libertucci.
Speculative investors have been offloading their long
positions in recent weeks in the face of weakening
supply-and-demand fundamentals. Traders have attributed the rise
in open interest - the number of outstanding contracts - which
was just over 186,000 lots on Wednesday, its highest level since
mid-June, to fresh shorts being placed.
Prices were also helped by a strong euro that bounced off
two-week lows after Spain unveiled a 2013 budget viewed as a
step in the right direction in helping to resolve the region's
debt crisis.
Cotton wasn't able to keep up with a buoyant broader
commodity market, fueled by oil and gold gains. The 19-commodity
Thomson Reuters-Jefferies CRB index was up 1.2 percent.
The market also digested weekly export data which showed a
drop of a third in sales to 130,500 running bales from the
previous week, with just under 55,000 bales heading for China.