You are right, Real Madrid and Manchester City are the two favorites in the Champions League this season, but unfortunately they had to meet too soon in the quarter-finals. I was basically expecting Manchester City to play Real Madrid in the semi-finals, but that never really came true.
Actually, there are 3 favorite teams to win the UCL trophy. We have Bayern Munich besides Man City and Real Madrid. We don't forget that Bayern Munich is also a strong team and they often has a good history in UCL. It is very unfortunate that among these teams, 2 of them must fight in the current round. People expect that those 3 teams will be in the semi-final round at least.
Real Madrid has home advantage in the first leg, while Manchester City will have it in the second leg. Manchester City already have experience beating Real Madrid, but they will never be able to do the same thing every season if Ancelotti has learned enough from his mistakes last season. I would certainly expect the opposite, I mean Manchester City must can beat Real Madrid in the quarter-finals this season.
If we look at the previous round, the team which has a home match in Leg 2, will have a bigger advantage. Leg 2 will be the final match to qualify for the next round. In Leg 2, both teams will try to play all out, they won't think to play defensively anymore. Meanwhile in Leg 1, the teams can decide to play very careful to avoid conceded goals. So, Man City actually has a better chance because they will play at home in Leg 2.
Ancelotti may have learned from the mistake in the last season, but Guardiola must always learn how to exploit the weakness of Real Madrid. We know Real Madrid attacking sometimes doesn't work well because they have no pure striker. And Real Madrid defense also looked not really convincing because some key players are injured.