des.The Gunners' challenge has suffered major setbacks in their last two matches
They were thrashed 6-0 at Chelsea on Saturday and were then held to a 2-2 draw at the Emirates Stadium by Swansea on Tuesday.
Ahead of this weekend's game, they are fourth in the table with 63 points from 31 games.
Their third-placed visitors are three points better off with 66 and have two games in hand over them - as well as over second-placed Liverpool, who are on 68 points, and leaders Chelsea on 69.
Arsenal manager Arsene Wenger has stressed he and his players have not given up on the title.
And when asked at his pre-match press conference on Friday about Wenger's men, Pellegrini said: "I think Arsenal have a chance of winning the title.
"Maybe they didn't play well or have the results they needed in the last two matches.
"But I think that all the teams will drop points also from now until the end of the season, so I continue thinking that Arsenal have a lot of chances to fight for the title."
In contrast to Arsenal, City head into Saturday's 5.30pm encounter in formidable form.
On the same days as the Gunners' meetings with Chelsea and Swansea, Pellegrini's team beat Fulham 5-0 at home and then won 3-0 at Manchester United.
The Chilean manager is keen for his side to keep up their momentum in what he regards as a vital match for their run-in.
But he certainly does not expect victory on Saturday to come easily, and has also stressed that the fixture is not the be-all and end-all for City's title push.
"It was a very good start to the week, and we hope we finish in the same way," Pellegrini said.
"It is always important for this club, the players and the fans to win the derby against United and we did it.
"Now we must continue by trying to win the next match and continue fighting for the title.
"This is a big game because it is against a team that is fighting for the title also.
"But it is not the last match and not the match that will decide the title
It is a huge step for continuing in the way we are going so far.
"Maybe Arsenal did not have a good week but they continue being a very good team.
"They are playing at home, they have very good players and I am sure that we will need to do a very good game if we want to win."
Manchester City have playmaker David Silva available but will once again be without striker Sergio Aguero.
Beating City would boost Arsenal's title hopes, and also put some distance back between themselves and fifth-placed Everton, who are six points behind and with a match in hand ahead of their showdown at Goodison Park next weekend.
"If people say that Everton can catch us, that means we can catch the teams above us as well because they play against each other," said Wenger.
"The next game is of massive importance because it is Man City and they fight at the top.
"They are the favourites with Chelsea and Liverpool, but when you play one of the favourites, you have an opportunity to shorten the distance with them."
Wenger added: "Let's not forget we are in an important race in the Premier League, we are in the semi-final of the FA Cup, so it is at the moment not as doom and gloom as everybody paints the situation.
"We want to finish first in the league and everything else, the other priorities are still there.
"You want to be in the Champions League, of course, but it is never good enough to be anything other than first and you hope always you are the best.
"If you ask any team, and they have to be in the top four (so) you cannot say as well it is a shame, but you want to be first - you do not work day and night to be second."
Source : PA
Source: PA