The Hornets lost 3-0 at the Emirates but could have found a route back into the game at 2-0 when a penalty was awarded for Ainsley Maitland-Niles’ foul on Roberto Pereyra.
But Deeney’s spot kick was saved by Petr Cech and Arsenal went on to add a third goal as they eventually ran out comfortable winners. Gracia lamented the penalty miss at what was a crucial juncture in the game.
“We were preparing a change with Will Hughes coming on and to score to be 2-1 would have improved our options to draw. In the end it was impossible,” Gracia told Sky Sports.
“We conceded an early goal but after that we had difficult moments. We tried to score, but both teams created many chances.”
After Shkodran Mustafi’s early goal, Watford grew into the game and applied concerted pressure to the Gunners defence at the end of the first half and start of the second. Pierre-Emerick Aubameyang’s second goal put paid to any hope of a fightback.
“At the beginning of the second-half we played better,” Gracia said. “We controlled the game in the first few minutes but the second goal was very, very hard for us. Then we had the chance to score the penalty – but we missed.
“We tried to narrow and compact inside because we know with Mkhitaryan and Ozil in between the lines they are very dangerous. We also tried to create chances from set pieces and the counter-attack but if you don’t score it’s very difficult.”