Powell netted 10 goals on loan in the Championship last season for Wigan, who Forest face in midweek, and the paper claim are rivalling them for his signature.
The 20-year-old featured in Manchester United's under-21 side's 2-1 win over Chelsea's under-21 side on Monday night, which included senior players Victor Valdes, Rafael da Silva and Ashley Young.
He was loaned out to Leicester City earlier in the season but had fitness issues and struggle to break into Nigel Pearson's side, eventually being recalled.
With a spot in United's first team hard to seize, with Wayne Rooney and Juan Mata already jostling for his ideal position behind the striker, another loan is likely to be vital for his development.
The Football League loan window opening will provide Forest with the chance to make their pitch to United and Powell, and try to convince both he should join Dougie Freedman's side.
A highly rated talent from his time at Crewe, Powell needs to play regular football, and helping to try to fire Forest into the play-offs is a more attractive challenge than playing for relegation embattled Wigan.
Powell is an exciting prospect who even scored on his Manchester United debut, against the Latics, but has been unable to kick on since.