Kaspars Gorkss scored what proved to be the decisive goal after only five minutes, heading in a Jordan Obita corner, although Watford missed a number of good chances to equalise after the break.
The Royals boss said: "I thought we started the game very brightly. We were on the front foot, I think we had four crosses in the first couple of minutes.
"It was a good goal from the set play, a good delivery from Jordan Obita and Kaspars on the end of it.
"I thought we played some good football in the first half against what I believe is a good side in Watford.
"We've got a lot of players out who have been out injured for a long time and obviously (it comes) on the back of a couple of disappointing results over Christmas.
"But the resolve that the players have gone and demonstrated again in the second half has shown the togetherness of everybody, the desire to work hard and that started with the front two going all the way through the team.
"We're really looking forward and we've got to enjoy the second half of the season.
"We've had an abundance of injuries all the way through we've had to deal with, there's been an inconsistency in team selection because of that.
"Obviously the form over Christmas with the results going against us wasn't ideal and Leicester are doing a great job now where they are in the league.
"But we're back on track for the play-off positions with 21 games to go and we're really going to enjoy the second half of the season."
The defeat was Beppe Sannino's first since succeeding Gianfranco Zola as Hornets head coach and he was disappointed with his side's first-half performance.
He said: "We started the game 45 minutes late and I'm disappointed for the supporters and for my group. I hope that this will be a starting point to improve and to understand something.
"I would like to see my players always play good football, nice and easy football as well, but we were a little bit slow today.
"It was difficult to come out with the ball. We played a lot of back passes which disappointed me, that was the point I didn't like today. But it is a part of my job. What we saw in the second half is giving me a lot of positives."
Sannino gave a debut to new loan signing Alexander Merkel but he was sent off in time added-on following a challenge on Nick Blackman.
Asked about the red card, the Italian replied: "It's a shame. It was a foul of frustration I think where everybody would like to touch the ball, to recover the ball, to go and attack.
"But the minutes were going very quickly. If the referee did show him the red card, you have to respect the decision."