However, Everton are still favourites to sign the 27-year-old.
Earlier this week, GFFN reported that the Toffees have submitted a bid for the French midfielder but the Hornets have turned it down.
Everton are preparing an improved offer for the box to box midfielder as Doucoure seems to be a priority target for Ancelotti.
Watford, who will play in the Championship next season, are keen to offload him. But they want an initial £25million upfront to sanction a sale.
The Toffees are clearly the frontrunners due to their long-standing interest in the Frenchman, but they could face strong competition from the likes of Wolves and Fulham.
The midfielder is determined to stay in the Premier League. He has been attracting interest from several French clubs as well, but his preference is to stay in the Premier League.
Doucoure has impressed in the Premier League over the years, and he would be a very good addition for Everton, Wolves and Fulham.
It remains to be seen whether Fulham and Wolves come up with an offer for him in the next few days. However, he is more likely to make a switch to Goodison Park.