Can I buy euros? After reaching a new high for the year in January, investors are caught in a dilemma.

The EUR/USD surged nearly 1% to 1.1768 on January 20, hitting a new high for the year. At the same time, the U.S. dollar index plummeted 0.7%. This rally is driven by a chain reaction triggered by geopolitical tensions and monetary policy developments. Investors are now asking: Is there more room for the euro to rise? Should I buy now?

Why Did the Euro Surge? It’s Not Just Exchange Rate Fluctuations

The immediate spark for the euro’s sharp rise was the trade tensions between the U.S. and Europe. Due to the Greenland dispute, U.S. President Trump threatened tariffs on Europe, prompting Europe to consider retaliatory measures. Markets worry that a U.S.-EU trade war could actually happen.

But this is only the surface. Deeper drivers stem from the resurfacing of “de-dollarization trading.” According to George Saravelos, Head of FX Research at Deutsche Bank, European countries hold a massive amount of U.S. assets—about $8 trillion in U.S. bonds and stocks—almost twice the combined holdings of other countries. In this context, Europe might consider selling some U.S. assets as a countermeasure. If a large-scale rebalancing occurs, the dollar could face significant selling pressure.

Additionally, changes in Japan’s bond market are also contributing. Japan is about to hold a general election, and Prime Minister Sanae Takaichi proposed lowering the consumption tax on food, sparking concerns about Japan’s fiscal health and inflation. The yield on Japan’s 40-year government bonds soared to 4.24%, a record high, which in turn pushed U.S. Treasury yields higher. These chain reactions ultimately increased the attractiveness of the euro relative to the dollar.

Increased Volatility Is a “Double-Edged Sword,” and TACO Trading Has Hidden Insights

However, the euro’s rise is not one-way. Credit analyst Faron believes that while Trump’s tariff threats reignited market fears of “selling off the U.S.,” traders should also watch out for “TACO trades” (Trump’s potential retreat). That is, Trump might just use tariffs as bargaining chips and not actually implement them. If he pulls back, the dollar could gain support.

This uncertainty has led to increased euro volatility. Morgan Stanley has warned that the euro could experience swings of 10% or more. According to their analyst, “Traders are underestimating the risk of extreme scenarios; the euro could fluctuate 10% or more in either direction from current levels.”

This means investors face not only the risk of upward movement but also the possibility of sharp reversals. The euro can be bought, but risks and opportunities coexist.

Investment Decision: Is the Euro Worth Buying?

While the euro has risen in the short term, whether it can continue higher depends on several factors. First, how will the U.S.-Europe trade dispute be resolved—will it escalate into a real conflict or just be a false alarm? Second, the stability of Japan’s bond market and the direction of U.S. Treasury yields. Third, the true scale of “de-dollarization” trading worldwide.

For those seeking euro investment opportunities, now is not the time to rush blindly. In a high-volatility environment, timing the entry is crucial. Pay attention to developments in U.S.-Europe negotiations, statements from the Bank of Japan, and market pricing of U.S. bond yields. Once volatility slightly subsides and signals become clearer, the timing for entry will be more mature. In short, the euro can be bought, but only after risk factors have been released and the market calms down.