A 3-0 demolition of Huddersfield Town at Vicarage Road on Saturday moved Gracia's men within two points of the Premier League's top four.
Roberto Pereyra, Gerard Deulofeu and Isaac Success were all on target as Watford collected another three points following a 2-0 triumph at Wolves last weekend.
And although Gracia will not get carried away with his team's fine form, the Spaniard feels the depth at his disposal is comparable to any other Premier League club.
"For me, it's the best in the Premier League," he told a news conference when asked to assess his squad's depth.
"The end of the season is very far and I prefer to enjoy every game. I'm very demanding - I think the best way to achieve a good future is to be focused on the present and to do our best in the present. It's our mentality to try and be demanding in all of the games.
"I don't spend much time looking at the table at this moment or if we achieve a new record, I prefer to be demanding today. We have many things to improve and tomorrow we'll speak about that and try to improve these things to improve the level of the team.
"I don't think we'll be champions at the end. But we're going to try to and enjoy every game and try to make our supporters enjoy it with us so they feel proud of us in the games we're going to play.
"We'll see what we're going to do but in all the games we're going to make a big effort to get the best results."
Hughes shone again, with Watford fans chanting for the 23-year-old midfielder to be included in Gareth Southgate's next England squad, and Gracia agrees international recognition should be imminent.
"If you ask me my opinion, me too. But I respect the national team's decision and all I can say is that we're here and ready and supporting them," Gracia said. "When they want Will Hughes, we'll be ready.
"He's playing well at a high level but it's not my decision to select the players they prefer. It's not my job and I try to do my job but if you ask me my opinion then all of my players deserve to play with their national teams."
Huddersfield are bottom of the Premier League after a fifth defeat in six matches and David Wagner had no arguments about his team's latest loss.
"We started well and created three good opportunities, but we have to be honest - defensively, our performance was not good enough today," the Huddersfield head coach told reporters. "Because of that, it was a deserved defeat.
"For their first goal, we were so naive. We didn't make it difficult enough for the player to get in the box. We didn't shuffle over and help our defender for the second goal. You can get beaten one-on-one - it happens - and we have to help him.
"I've said for the whole time that we need to keep performing at the highest level and defensively we did not do this today.
"We have a long time until our next game now, so every player has the chance to impress in training. They have to show that today's defensive performance was a one-off."