Liverpool are set to host Bayern at Anfield on Tuesday in the first leg of a heavyweight European tie.
The Reds currently sit level on points with Manchester City atop the Premier League table despite having played one match fewer than their title rivals.
With their run of league form, Liverpool are seen as the favourites in their upcoming meeting with the German champions, but Gnabry says Bayern certainly have a chance to win.
"I do not think the public is wrong. Liverpool is playing a very strong season, you cannot deny that," Gnabry told Goal.
"That's okay. But that does not mean that we go into the game and say, 'There is nothing to get.' On the contrary: We have our strengths, we are Bayern. Everything is possible."
Bayern will be forced to deal with Liverpool's lethal attack, led by Mohamed Salah, who leads the Premier League with 17 goals this season.
Sadio Mane has added 12 goals of his own while Roberto Firmino is one goal away from reaching double digits.
As a winger, Gnabry says he can learn from all three of Liverpool's stars, but he sees a different player as equally important to Liverpool's Champions League challenge.
"Georginio Wijnaldum. When I watch Liverpool games, he's everywhere," Gnabry said.
"He works in the background, bridging the spaces between defence and midfield and has a very large impact on the Liverpool game."
Having conceded multiple goals in three of their last four games, Gnabry says Bayern's defence will be vital and will have to improve to extend their Champions League run.
"It has been seen that you cannot afford fails in the Bundesliga," Gnabry said.
"Of these we have had too many lately, we conceded too many goals. We have to turn that off.
"Liverpool mercilessly exploits such mistakes with its three fast offensive players."