Malky Mackay's home side took the lead inside three minutes through on-loan Birmingham midfielder Jordon Mutch but McGugan rattled in his eighth goal in 10 games to send Billy Davies home with a point.
The Hornets were hammered 4-1 by Forest's rivals Derby last weekend and appeared determined to make amends as they took the lead inside three minutes.
Danny Graham - fit again after a back injury - battled well to win the ball on the right flank and delivered a marvellous cross which Mutch headed into the top corner.
Forest responded brightly, with Paul Anderson in particular looking dangerous every time he received possession, and it was no surprise when they did level in the 20th minute.
Chris Gunter and Chris Cohen combined on the right, and when Cohen's cross was not dealt with, the ball rolled out to McGugan 25 yards from goal.
The in-form midfielder confidently took a touch before rifling a powerful drive across England Under-21 goalkeeper Scott Loach and into the top corner.
It was a stunning strike which was matched moments later as Loach produced a fantastic reflex stop to keep out Dexter Blackstock's close-range volley.
Watford looked rattled but still could have regained the lead just before the break when Michael Bryan stole in at the back post but his effort was well defended by Luke Chambers.
And the home side came even closer in injury time as John Eustace planted a header against the bar, after Lee Camp had spilled a cross.
Eustace fired over the top at the start of the second period and as the home side started brightly Troy Deeney should have done better with a header which he guided at Camp.
Forest manager Davies introduced Nathan Tyson late on and he should have done better with a header from the penalty spot which drifted over the top.
Deeney then again shot over wastefully as the match petered out and both sides took a point.