There's no reason for Madrid to underestimate Bayern.
They have always been one of the most dominant team in the UCL in recent years so caution would be employed while playing them no matter their form.
Indeed. Real Madrid can't underestimate Bayern Munich although this team is in bad performance in their domestic competition. Bayern Munich is surely a strong team in UCL, they even always becomes one of the favorite teams to win the UCL trophy. Moreover, Bayern Munich has no hope for domestic trophies, they will focus on UCL now. I'm pretty sure Bayern Munich will play all out, they won't care with the possibility of injuries or anything. Reaching the final UCL and win the trophy is their main priority now.
-snip
but even though Bayern Munich is as strong as it is and cannot be underestimated, for Real Madrid the pressure against Bayern Munich is not like when it is against Man City.
so, even though Madrid has to admit that Munich is one of the strongest teams in the UCL, at least Madrid will be more relaxed in planning their strategy to get rid of Munich because this big team from the Bundesliga is experiencing difficulties in their defense and Ancelotti will take advantage of this.
even though the attack line has Kane, Kane still won't be able to break through the strong defensive wall that Madrid currently has and out of my mind I predict that Madrid will have a greater chance of qualifying for the final round.