Can XMR be traced?

Could you please elaborate on the privacy features of Monero (XMR) and clarify whether it's possible to trace transactions involving this cryptocurrency? I'm particularly interested in understanding the extent of its anonymity and whether there are any known methods or tools that could potentially reveal the identities of users or the amounts involved in transactions. Additionally, are there any legal implications or regulations that could affect the traceability of XMR transactions? Thank you for your insightful response.