Pundit predicts Manchester United to beat Manchester City this weekend.
United are looking to end a run of four successive losses against their rivals, and do so in good form, while City are remarkably below them in the Premier League table.
Merson said that United's wins against Tottenham, Liverpool and Aston Villa have changed his mind about the direction in which they are headed.
He said: "If you had asked me six weeks ago I would have said that City would be the biggest banker you’d ever see in your life but I don’t see that now. Man Utd are favourites. They’ve turned a corner. They are buying in to what the manager wants.
"Louis van Gaal has got everybody confident and playing well while City’s confidence must be low, they’ve lost three in a row. You can’t just turn it on, like a tap."
Merson was weeks ago slating United, and ahead of the Spurs game at Old Trafford he predicted an easy win for Mauricio Pochettino's side.
The rate and which United have caught City up over the past few weeks has surprised many, and they will be keen not to let it slip by allowing Manuel Pellegrini to give his side a lifeline with an away win.
There is pressure on the Chilean's job, and a United victory could even seal his fate.
As well as the ignominy of losing to their rivals for the first time under his management, City would see themselves looking over their shoulders for the rest of the season trying to hold off pressure from Liverpool and Tottenham for the fourth place spot, and that will be a task Manchester United will enjoy setting them if they can record a victory.