The Dynamo held discussions with Watson's representatives last year but a potential deal fell over and now he has new agents, it looks as though the move will be done.
As for Taylor, he just has to pass a medical for his shift to Houston to be complete.
"We're continuing to carry on conversations with [Watson's representatives] and are working to get a deal done," said Dynamo president of business operations Chris Canetti.
"We think we had a good off-season, but we've acknowledged that we're not the finished product. We think the backline has been solidified with the additions we made there, and we're still out there looking for players who can help us on the attacking side.
On Taylor: "We know it's a leg injury of some sort," Canetti added. "We're not sure if it's a foot, or ankle injury but he's on his way to Houston and will be evaluated by our doctors."