Real have been in imperious form and lead the Primera Division by two points heading into the match in the Spanish capital.
With qualification for the second stage of the Champions League assured and the UEFA Super Cup already won, Real could win five trophies this season, with the Copa Del Rey and World Club Cup to play for as well.
And, worryingly for their opponents, Ancelotti believes there is still more to come from his star-studded line up as well.
“It’s very difficult to say if this team can improve, but I think they can. With hard work, being used to playing in a set way, we don’t have to put limits on improving – there are no limits,” said Ancelotti, who has received praise from players and the media.
“I’m enjoying a great moment. Things are going well, I have a great relationship with the players, we have the same objectives, we are fighting together…Hopefully this moment will last for a long time.
“I know there will be difficult times, but I know with this team we will overcome them quickly.”
Ancelotti confirmed at his pre-match press conference that Asier Illarramendi will replace the suspended Isco, while Sami Khedira is missing once more.
The Germany international has been plagued by injuries over the last year and spent the night in hospital on Tuesday after suffering a head blow during 5-0 Copa del Rey triumph over Cornella, although he was discharged on Wednesday.
Cristiano Ronaldo is certain to play – the Portuguese has scored nine goals in five matches against Celta.
“They (Celta) play a little different from last year,” said Ancelotti who is impressed with the work of his opposite number Eduardo Berizzo.
“His results speak for him. He has won at the Nou Camp and drawn with Atletico. They are a forceful and aggressive team. We need to play like we have in recent games. “
Celta have lost their last three in all competitions, but instead of fearing Real and their record, forward Santiago Mina believes his side can replicate their win at the Nou Camp and shock Real.
“People also thought it was impossible to beat Barcelona at home,” he said at the pre-match press conference.
“We went there to play with our weapons and at the end we got a very good result.”