Many financial market participants are braced for the possibility of a major market swing today after the Census Bureau announces its initial estimate of the nation's July trade deficit.

After the markets were surprised a month ago by a June deficit of $15.7 billion -- $1.7 billion more than in May and the second-largest monthly deficit ever -- the dollar's value dropped sharply and long-term interest rates began to rise.

This time economists and analysts are generally looking for a deficit of about $16 billion. If the number is much higher, it is likely that bond yields will go up another notch and the dollar will be under new downward pressure, analysts said.

If the number is lower, the dollar and interest rates could go the other way, they said.

The trade deficit has become one of the most closely watched government statistics because the markets have focused upon it as a guide to future Federal Reserve policy, the value of the dollar, inflation and the willingness of foreigners to continue to invest in the United States.

Alan Leslie, chief economist of Discount Corp. of New York, a government securities dealer, traced the connection this way: "The largest single buyer in our market {for U.S. government securities} in the recent past has been Japanese institutions. A large part of what affects their decision to invest is the value of the dollar. The trade balance is a reflection of what will happen with the dollar."

Leslie said the markets have been roiled during the past two days by rumors of what the July trade figure will be.

"There have been rumors it will be $20 billion. There have been rumors it will be $12 billion. We have had incredible swings in the market because the stakes are so high."

Whatever the number is, Leslie added, within a few days the "hype" associated with it will disappear and market participants will again turn back to economic fundamentals, which he said point to further increases in interest rates and declining bond prices.

That pessimistic view was shared by Raymond W. Stone and F. Ward McCarthy, economists at Merrill Lynch Capital Markets.

In their latest credit market memo, they wrote, "The trend in rates will continue to be upward in the months to come, with the lack of fiscal repair, creeping inflation, a sticky trade deficit and a vulnerable dollar providing the fundamental backdrop. ... The biggest negative in the market continues to be a psychology that is not likely to turn around until there is clear evidence that the trade deficit has turned around so that the end is in sight for dollar depreciation."

That turnaround in trade in dollar terms -- as opposed to volume measures -- could be well in the future, according to some economists.

One problem with basing market decisions on the trade numbers is that they are subject to wide month-to-month swings and to substantial revision.

For instance, a month ago the Commerce Department acknowledged that it had been undercounting exports to Canada. For all of 1986, Commerce said, such undercounting totaled $10.2 billion, and adding in those exports meant that the year's trade deficit was $156.156 billion rather than the $166.335 billion reported earlier.

Another difficulty is that the initial estimates are, by law, calculated with imports valued not just according to the cost of the goods but with the cost of insurance and freight included.

Two days later -- in this month's case, next Tuesday -- data is released showing imports valued on a customs or cost basis as well.

In June the $15.7 billion deficit was reduced to $14.1 billion when insurance and freight, which are services rather than merchandise, were excluded. The United States has a small surplus in trade in services.

Among other problems, the monthly figures are for a so-called statistical month. That means that import numbers in today's release will actually be for imports for which the paperwork reached the Census Bureau during July. A portion of those imports came in earlier months. The size of this monthly carryover can vary and affect the trade numbers accordingly.

Finally, the monthly figures are not adjusted for seasonal variation. Several believe there is nevertheless a seasonal pattern to them.

Samuel D. Kahan, chief financial economist at Kleinwort Benson Government Securities Inc., said a study he has done shows that "deficits tend to widen sharply in the months of January, April, June, July and October and to narrow in February and August as well as in the final months of the year.

"Thus the increase in the June trade deficit from $14.0 to $15.7 billion was about two-thirds seasonal in nature. On an adjusted basis, the trade deficit in June deteriorated by only about $500 million," he wrote in a weekly financial report.