Sky Sports News HQ reported just over two weeks ago that the Hornets were in advanced discussions with the 28-year-old after agreeing an initial loan deal with his current club.
Those talks broke down last week but are understood to have been renewed and Watford are hoping to get a deal over line, which is expected to involve an option to sign Suarez permanently in the summer.
He has played over 120 matches during two spells for Atletico after coming through the youth ranks and worked under current Hornets boss Quique Sanchez Flores.
He has won four caps for Spain and during his second stint for the Spanish club he was a key player in helping Diego Simeone's side win La Liga and reach the Champions League final in 2014.
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