Ancelotti is being linked with AS Roma and also the Brazil job, though insists he wants to stay where he is.
The Italian has over a year on his current deal and said on Friday: "I'm not going to ask to leave this club."
He continued: "We're doing well, but we have some doubts after the extra time. The team is upbeat and motivated, we're aware that Valencia are playing well. We're facing a delicately balanced and difficult game. We're motivated and ready to fight, we're aware that it's an important moment in the season."
Real Madrid meet Valencia on Saturday.
Ancelotti said: "We have improved this aspect in the collective sense, and I don't think there are any individual defensive failings. For example, against Real Sociedad, Alaba had a good game, but he was unlucky with two touches that led to two goals. In the match statistics we have had very low expected goals. In terms of defensive attitude, we didn't deserve to have conceded four goals.
"Offensively, we did deserve to score four goals. It's a characteristic of this year's team. We're more effective up front because of Mbappé, who has scored 33 goals. He's been important in that sense, but there's more suffering at the back. It's normal. When you choose one thing, you have to think about it. We're thinking about being more effective and doing a bit more collective work defensively."