Prepared by Dean Witter, Inc.

U.S. INTEREST RATES: Today's key developments fostered further moderate gains in interest rate futures:

1. At its major policy meeting which concluded today, the Federal Reserve decided to leave the overnight funds rate unchanged at 5½%.

2. The latest data reinforced the view that the business expansion continues to decelerate.

-May factory orders fell 0.7%, more than the forecasted 0.2%.

-General Motors reported exceptionally disappointing car and light truck sales for June. Their receipts were so weak that they are likely to drag down the forecasted total of all retail sales for the period. In that case, June will prove to be the fourth consecutive month of sluggish consumer activity.

Responding to these events, December Euros rose 1.5 ticks to close at 93.965; September bond rose 12/32nds to close at 112-02.

TOMORROW'S CENTRAL EVENT: At 8:30 am EDT, the Labor Department will release employment data for June. These statistics should disclose an improved performance over the month of May.

-The consensus forecast calls for an increase of 235,000 new payroll jobs, up from 138,000 in the previous month.

-The consensus prediction expects a rise of 5 cents in the average hourly wage and a lengthening of the workweek by 0.1 hours. These forecasts contrast with May's 4-cents gain in the average hourly wage and unchanged length of the work week. If the data matches the average predictions, it will signify some modest re-acceleration in economic activity. But, when viewed in the context of recent reports showing sluggishness, this evidence of tempered improvement should cause only a temporary retrenchment in the prices of interest rate futures. The employment data will have to be significantly stronger than the consensus forecast to reverse the current uptrends.

NEAR-TERM FORECAST: Because interest rate futures are temporarily overbought and because the jobs report is likely to show meaningful improvement, I expect a pullback tomorrow morning. However, after this forecasted retrenchment, the contracts should resume their current rallies and attempt to surmount the existing uptrend highs, set on June 20. Listed are areas for tomorrow's retrenchment; also listed are the highs of June 20 which should be tested early next week in the subsequent up- move:

					Target		June 20-High
 					For		High To Be
 Contract				Retrenchment	Challenged
 December Euros				 93.93		 93.995
 September 5-year Notes			106-00		 06-17+
 September 10-year Notes		108-02		108-25
 September Bonds			111-12		112-24

JAPANESE YEN: The government of Thailand freed the Thai Bhat from a fixed currency relationship, and it fell 15%. Among some Asian traders, this created a safe- haven demand for the Japanese Yen. Consequently, the September yen rose 27 ticks to close at .8926.

Today's activity in the yen does not have long-run implications. I believe that traders in the dollar/yen relationship are awaiting definitive news on two issues: whether Japan's economy is sufficiently strong to warrant an interest rate increase, and whether the country's trade surplus will continue to widen. Over the next week, we are unlikely to receive definitive data on these two questions. Therefore, I expect trading range behavior in the September yen between .8750 and .8950. The technical evidence suggests that, over the next two sessions, we should test the upper quadrant of this range.

BRITISH POUND: In a wild day, as traders interpreted and re-interpreted UK fiscal policy, the September BP initially fell to 1.6460 and then erupted to an intra-day high of 1.6760. On first analyzing chancellor of the Exchequer Gordon Brown's speech to Parliament, traders concluded that he planned to use taxes to restrain consumption. Such a policy would reduce the need for additional interest rate increases, and on this interpretation, traders pushed the September BP lower. However, a detailed reading of the speech indicated that the proposed taxes would fall on investors, not consumers. Traders then inferred that the probability remained high that the Bank of England will raise interest rates this summer. The September BP then exploded to the upside, and it closed at 1.6722-a gain of 166 ticks. With today's rally, the September BP is in the fifth wave and mature stage of an up-movement which began June 6 from the low 1.6150. I believe that the contract is near an important top which should be made in the 1.6800/1.6900 area. Then, I expect a pullback to 1.6400/1.6500.

DEUTSCHEMARK AND SWISS FRANC: The German government provided evidence that the economies of continental Europe continue to falter. It reported that industrial production for May fell 0.2%, quite different than the expected 0.5% increase. Responding to this data, traders pushed the September DM and the September SF to new lows in the latest leg of their 2-year old downtrends. The September DM closed at .5735, a loss of 21 ticks; the September SF closed at .6864, a loss of 21 ticks.

From an intermediate perspective, I believe that the major downtrends in the DM and the SF have more to go. Over this summer, I expect the lead DM contract to reach .5570 and the lead SF contract to reach .6700. Near term, however, they are temporarily oversold. I believe that the odds favor modest bounces to .5780 in the September DM and to .6910 in the September SF.

Two elements generated further losses in the precious metals, and August gold made a new downtrend low in its 17-month decline. September silver came within 1 penny of matching its existing downtrend low.

1. With commodity indexes continuing to fall, inflation-fears receded.

2. Next week, Russia should resume its long delayed shipments of platinum and palladium to world markets.

I still hold the same forecast.

-During the month of July, August gold should drop under 330.00. Near term, however, it is oversold and its decline should decelerate. Further near-term losses should be contained at 330/331. A corrective bounce should meet resistance at approximately 336.

-During the month of July, September silver should drop under 455.0. Near term, however, it is oversold and its decline should decelerate. Further near-term losses should be contained at 460.0. A corrective bounce should meet resistance at 472.0/475.0.

COPPER: Prices traded in a rather volatile fashion as early weakness linked to the LME stock build of 1,750 tonnes encountered scattered support. The support appeared to have been linked to renewed strength to the backwardation which moved out to 150 from a low of 110 early in the day. The strength to cash values might have been linked to short covering following the options declaration. Despite the recovery we suspect values will still be restrained on the upside as slack Far East demand and rising production later this year weighs on values. However, resistance will need to be maintained in the backwardation at 150.

The petroleum complex recovered from sharp early losses to close firm as good buying interest developed late on the failure of Iraq to submit an aid distribution plan along with reports of a refinery outage at Ashland Oil Minnesota refinery.

In crude, the API report along with reports that Iraq would be submitting their aid distribution plan to the UN today helped touch off fresh selling interest overnight. However, the weaker tone could not be sustained as nervousness built throughout the day on the failure of Iraq to submit their plan. A general lack of overhead selling into the long holiday weekend helped uncover active short covering. In addition support to the switches continued to be evident and the market might have been impressed by the contra seasonal draw in crude stocks which represents high refinery utilization rates. For tomorrow the market might focus on the switches and whether the strength in the August-September switch can be maintained. The ability to break back above the 20.20 level basis August should allow some additional buying interest to emerge which could carry values up to the 20.80 level basis August. Although from a fundamental perspective, we suspect that these levels might not be justified, we suspect the deeply oversold condition is continuing to be a large contributor to the price gains.

In product markets, gasoline found good support on the Ashland outage along with the light delivery notices against the July contract of 525 contracts. However, it was somewhat surprising the gains weren't more sizable particularly in the cracks. Heating oil generally lagged the rest of the market reflecting the sharp build in inventory levels. However the back month spreads continued to hold there. For tomorrow, we suspect activity might be limited by the holiday but some nervous profit-taking might develop into the weekend on the possibility Iraq will submit an aid distribution plan any day now.

Natural gas traded under pressure as cooler weather conditions and nervousness in advance of the AGA report put pressure on values. The weak tone was reversed after the AGA report was released. The report generally showed a 74 bcf build which was well below the 90 bcf build of recent weeks. Despite the prospect for a modest recovery toward the 2.12 level, we see the stock situation and weather as negative enough to encourage lower levels.

COTTON: Prices drifted lower with little fresh news to attract interest. Light liquidation pressure was apparent in advance of the export sales report. With little fresh news in prospect, the market might need to consolidate. However, renewed support should develop against the 76.50 level. Good heat units appears to be favoring development of the crop which should help limit any strong rally attempts and keep prices in a consolidative range.

SUGAR: The market came under active selling pressure on renewed cash weakness reflecting the good availability of Brazilian sugar. In addition a lack of Russian demand also led to rather active liquidation pressure by commission houses and funds. For tomorrow, support rests near the 11.00-cent level basis October. A failure to hold this level might uncover active selling down to the 10.70 area basis October.

COCOA: Active selling interest emerged as the market failed to follow through to the upside. Weakness appeared to be linked to ideas that the Ivory Coast crop was unlikely to be affected by recent weather conditions which have been generally favorable. With the crop looking generally in good shape, there appears to be little justification to maintain values much above the 1600 level basis September.

COFFEE: A lack of a freeze threat continues to keep values restricted on the upside and has generated liquidation pressure. While the market might be nervous into the long holiday weekend, we suspect that values will likely come under pressure in the absence of a freeze situation.

FROZEN CONCENTRATED ORANGE JUICE: Prices continue to consolidate in a rather tight range. Movement remains light at 4.7 mg. We still see limited upside potential. Overall good resistance is likely on recoveries to the 78-cent level and possibly 83 on favorable new- crop prospects.

With South America basis levels higher this week's bullish consensus at 20% in beans and meal and bean oil at 10% after the break, the soy complex helped lead an initial short-covering bounce at the CBOT Wednesday. Despite heavy rains in the dry areas of North Dakota and generally favorable Midwest weather outlook going in the weekend, wheat and corn also followed beans led in during the first hour of trade as most pits were in need of good correction after the recent pounding of the past 2 weeks.

SOY COMPLEX: This enthusiasm didn't last long in old-crop beans which sold off sharply once again after mid- day when one fundamental fund sold 4-5 million July. ADM stopping bean oil for the 3rd day in a row did lend some support to this product, but fund and commercial selling in meal left this pit sluggish, similar to U.S. basis levels today. Reports that Continental recent shipments to Chicago now total over 400,000 bushels also added to spot July break to near 700 as renewed talk about deliveries also surfaced near noon. On the day, fund selling continued, led by Griffin, Refco and MLP in new crop, but Fimat was again a hefty buyer of November beans for the second day in a row. Commercials were modest scale down buyers of beans while Cargill was a heavy buyer of bean oil by the close.

After a modest recovery when July beans didn't break 700 on today's selling, old- crop values in beans and meal still slumped on the close. After another day of fund selling, beans, meal and bean oil OI are likely to jump again tomorrow.

With the trade talking very small old- crop beans and meal buys of 10-60K and 15-40K for Thursday morning with negative beans being touted by some on cancellations, even modest levels could be supportive to old crop. Because of this possibility and the generally light farmer selling on this break except for few areas, we held on to our August/November spread by moving our close only point to +82 August late today. We need a quick rebound back into the 90's, otherwise, we are out. New-crop sales of 100-400k beans and 20-30k meal are also expected along with 20-30k 96/97 bean oil. This week's NOPA crush won't be until Monday morning with early talk of 23.5-24 million.

CORN: After a slightly mixed start, corn also firmed on spillover from beans and no deliveries against July. Some heavy fund selling from Griffin of 20 million December, but commercial buying of new crop and this pit's oversold condition limited pressure from locals and other commodity house. Some buying of corn and sellng beans on intermarket basis was also reported today, but this pit's ability to absorb today's Griffin selling without new lows helped this pit stay firm on close.

With 300-500,000 old-crop and 300,000 new- crop sales on Thursday, solid demand seems to be around, but today's NWS 6-10 day suggesting cool temps and wet weather for the Midwest during 7/8-12 when the corn begins to pollinated should keep December's nearby resistance at 238-39 with 243-45 also another tough zone. Our yield ideas are in the low 130's, but talk as high as 145 bu now around.

WHEAT: Australia cutting it 97/98 wheat exports by 3 mmt to 11.5 and beans early strength lent support today, but July's first deliveries, Iranian reports of better harvest results and MGE staying sluggish on 2-4" rains in North Dakota all limited today's recovery. Commercials were light buyers, but funds quiet. Export talk is 500K while today's wet 6-10 day positive on slow Plains progress, but fresh demand needed too.

July 2, 1997 Dean Witter, Inc.

150 South Wacker Drive, Chicago, Illinois

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