Howe saw Cherries claim a share of the spoils after Lewis Grabban's second-half penalty had cancelled out Gabriele Angella's first-half opener for the Hornets.
Cherries squandered a series of presentable chances to avenge a 6-1 defeat at Vicarage Road in August with Grabban seeing a second spot-kick saved by Manual Almunia.
Howe said: “I thought we were very good and dominated with the ball for the majority of the game. It was no mean feat to do that against a team like Watford who try to do it to you.
“If you compared this with the two previous games against them, I thought it was a lot tighter and weighted in our favour so we showed we had improved.
“We created a number of chances and had two or three gilt-edged opportunities. But we got hit by a sucker-punch right on half-time, which was a killer blow for us.
“But the response from the players was very good and I was really pleased with our second-half performance and we really should have won comfortably in the end.”
Discussing Watford's goal and the two penalty decisions, Howe said: “We shouldn't have conceded the free-kick for their goal in the first place. It was disappointing because we went into half-time on a downer. But credit to the players because they responded very well.
“I had a clear view of the first penalty and thought it was a stonewaller. Lewis Grabban was fouled and the linesman made a very brave and correct call to help out the referee.
“I didn't have a good view of the second one. I saw Marc Pugh go down and it looked like he was going to tap the ball into the net so my first emotion was it must have been a penalty. But without having seen it again, I can't say for sure. Our players were incensed because they felt it should have been a second red card.”