United are currently 10th in the Premier League, 7 places below Watford, and manager Jose Mourinho has been heavily criticised in recent weeks for his side's poor performances.
Despite this, Gracia downplayed the suggestion that the Red Devils are in crisis.
"I don't understand that word "crisis". I don't know if they are in crisis," he said.
"I only know they have a very good squad and they can choose different players, most of them internationals.
"I'm sure they play with 11 very good players and it will be very hard for us.
"But at this moment, playing at home, we feel we have the confidence to compete and to try to get points.
"The results help us to feel we can do it, but I know it's only the feeling, because you have to do many things to win."