Speculation has swirled around the Los Blancos boss since reports emerged over a potential move to the Brazilian national team at the end of the season.
However, Ancelotti told reporters post-match at the Etihad Stadium that he retains the backing of Real president Florentino Perez, who publicly endorsed him earlier this month.
“Nobody doubts my future, because the president was quite clear 15 days ago,” he said.
“It's a very heavy scoreline for Real Madrid,” he told Sky Sport Italia after the City defeat.
“Now maybe he’s thinking about that offer from Brazil, which perhaps in this moment should be taken into consideration because today there are stronger teams around [than Madrid]. If he wants to retire with a success like the World Cup, this is his chance.”
Ancelotti appeared to brush off the nature of his side’s defeat in Manchester, stating that it does not need to turn into a “drama”.
He added: “We haven't done what was planned, but we don't have to make it into a drama. We haven't had the ability to reach the final. This season we've done very well and we'll do better next season.”