It is understood that although the Hornets are interested in the midfielder, they will find it extremely difficult to persuade him to make the move to Vicarage Road due to the fact other European sides are also keeping tabs on him.
Cagliari are believed to be willing to let Nandez leave on loan if a team agrees to an obligation to purchase him in the future for a fee of €13m (£10.9m).
Nandez, who has been capped on 49 occasions by Uruguay at international level, originally emerged as a target for Watford last month.
A report from journalist Gianluca Di Marzio revealed that the Hornets had contacted Nandez’s agent regarding the possibility of a move.
However, it is now looking as if Watford will need to look elsewhere if they are indeed hoping to bolster their options in midfield.
The Hornets have managed to bolster their squad this summer by securing the services of two players.
Vakoun Bayo and Rej Manaj are both set to feature for Watford next season after sealing permanent moves to the club.
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When you consider that Watford are no longer able to provide their targets with the opportunity to play in the Premier League, it is hardly a surprise that Nandez reportedly believes that there are more attractive options out there.
Lyon currently play in Ligue 1 whilst Monza and Torino are both set to participate in Serie A later this year.
Having played 88 games in Italy’s top-flight division during his career, Nandez may want to remain in this league for the upcoming term following Cagliari’s relegation to Serie B.
As for Watford, it will be interesting to see whether they decide to strengthen their midfield ahead of their showdown with Sheffield United in August as they will unquestionably be keen to launch a push for promotion in the Championship.