Trout. Caddis, pale morning duns, midges, and pale evening duns are the primary hatches, especially the first two; the PMDs will fade by mid-month, however.
Fishing will be fair in the morning hours (watch for caddis and midges in the backeddies in the early a.m.). Afternoons will be slow, but good fishing will return in the evening. You can still pick up fish during the bright midday times, but you have to be more clever about it: look for trout along the banks, under shade trees, and in fast, broken water.
If there's a pale morning dun hatch, it will probably start about 11:00 a.m. and end around 1:00 p.m. or 2:00. If it's a cloudy day, the hatch will start earlier and be more intense. Dead-drift a size 18 Pheasant Tail or Gold-Ribbed Hares Ear near the bottom before the hatch. Then switch to a size 18 Sparkle Dun, Parachute PMD orPMD Cripple when trout are taking duns from the surface. Carry Rusty Spinners in size 18 in case you encounter an evening spinner fall of PMDs.
Following the PMDs, many trout will take a siesta until about 5:00 p.m. when they will begin looking for caddis and midges. However, it is possible to pick up trout on the surface even in mid-afternoon. To do this, look for shady areas near the bank and cast a size 14-16 Elk Hair Caddis or other adult pattern; tan or olive are good color choices. If you can, fish the west side in the afternoon because it will be shaded first.
Carry size-14 tan, size-16 gray and olive, and size-18 black caddis patterns, such as Elk Hair Caddis, X Caddis, Casanova Caddis, or CDC Caddis. Spent caddis patterns can also be effective, especially in the morning. Jeff Morgan's Lights Out Caddis imitates this stage.
You might run into a pale evening dun hatch between 4:00 and dusk, but this hatch is on the way out. Craneflies, yellow sallies, yellow quills, and aquatic moths are other possibilities this month.
Spotted caddis and saddle-case caddis are still hatching. A few blue-winged olives may be in the mix around mid-month. Make sure yellow sally and cranefly patterns are in your fly box, as well. Aquatic moths--which resemble caddis--are another factor at this time of year.
The golden stoneflies and salmonflies are essentially done, although you might encounter a straggler or two. Even so, trout might take an imitation early in the month in the upper river; some habits are hard to break, especially if your brain is the size of a pea (I speak here of trout, not anglers).
As the weather turns sunny and hot, and as the river fills with anglers and rafters, trout might move farther out in the river and into the broken whitewater areas. They will also hug the banks and be in rocky areas. They're seeking safer, more oxygenated water. That's where you need to seek them.
Steelhead. It's not all about trout, of course. This is the month that summer steelhead arrive in fishable numbers. By mid-month, we should be catching some steelhead in the lower 15 miles, and by the end of July we should have reliable fishing as far up as Beavertail, and maybe farther.
The Deschutes is great summer steelhead water, and classic wet-fly swing tactics work well. Good fly patterns include the Freight Train, Green Butt Skunk, and Streetwalker. The best fishing is in the low light periods near dawn and dusk, but it is possible to pick up steelhead at midday. If you can't stand being off the water even when the sun is high, use a sink-tip line and a weighted purple Woolly Bugger; fish will be in deeper water, shady areas, and up under the foam at the heads of riffles.
No matter which species you're pursuing, remember that July weather can be unsettled and afternoon thunderstorms sometimes occur. Be prepared with rain gear no matter how sunny it looks when you start out. Carry plenty of drinking water (don't drink the river!).
Be extremely careful with fire this month. No smoking except in a car or boat. No campfires. No charcoal briquettes. No matches. No Coleman stoves with liquid fuel (propane is okay).
For more on July tactics and flies, see the Rivers in General forecast