The Spanish boss also said that midfielder Nathaniel Chalobah was yet to return to first team training after undergoing knee surgery in September.
"I am confident he (Deulofeu) will play with us before we finish the season," Gracia told a news conference.
"Chalobah is trying to recover, but in this moment I have no more news about him. He is not training with the team, but he is working in the gym."
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Watford defenders Christian Kabasele and Molla Wague are back in the first team fold after recovering from their respective injuries and are in contention for Saturday's league game against Burnley.
(Reporting by Aditi Prakash in Bengaluru)
