Juventus want to cash in on the Portuguese full back, as they will put the money towards signings such as Mathjis De Ligt.
City were expected to sign Cancelo to replace Danilo and give competition to Kyle Walker for the right back slot.
However, Corriere dello Sport indicates that Bayern are now in pole position to sign the attacking fullback.
Bayern have great relations with Juventus, which should help them get a more favorable price on the player.
City may also be having second thoughts about spending a big fee on a player who may not be first choice next season.