The well-organised Hornets haven't conceded a goal in their last three Premier League games, sitting seventh under new manager Walter Mazzarri after a solid start.
But Liverpool are one of the most in-form teams in the league, and even in Europe, having only lost one and drawn two of their first 10 games of the campaign.
The Reds can extend their unbeaten run to 12 games in all competitions against Watford, but Klopp acknowledges that his side must be at their best to be able to go into the international break on a high.
Klopp: Reds must make the most of 'positive moment'
He vowed that they "need a very strong side on Sunday" as he previewed the clash in his pre-match press conference.
Klopp said that Watford have "changed maybe more than we changed" as he noted that they have a new "manager, system, players too" and that they have "conceded zero in the last three games", which he believes "says a lot."
The German explained that Watford play "a different system to most of the other teams in the league" and said that they "have to respect this and work with it."
He explained how his team have prepared for that and done that "the whole week until now" and will continue to do so in the build-up to Sunday's clash, insisting that they will try "to figure out what we have to do" to beat the visitors.
Klopp asked his team to "play football" because they are at home and suggested that his team have "a lot of important things" to take away from "the last game before the international break" - calling on the Reds to "take a positive result, use the momentum and all that stuff."
The manager is confident that his team are still "in a good moment" and that they can "show we are still in a good moment" as he spoke about the importance of the fans' backing on home turf.
He lauded the crowd as "fantastic" in Liverpool's last home game, also praising their "really fantastic" away support in the win over Crystal Palace last weekend even "in the game when it was a little bit difficult."
Klopp said the staunch support of the club's supporters shows that it is "still quite positive in and around" Liverpool, which they "have to use."
He warned that Watford will pose plenty of threat and make it a "difficult game", insisting that their team is "not only" about the strike partnership of Troy Deeney and Odion Ighalo, labelling them "a really strong side with a very experienced manager" and adding: "We need all we have to win this game."
'We must focus on Watford, not previous 10 games'
Liverpool go into the weekend level on points with league leaders Manchester City and Arsenal, in second, despite a difficult start to the campaign on paper.
But their encouraging points total comes as no surprise to Klopp, who said that they didn't set a goal before the season started as he explained: "You shouldn't say after 10 games that you want to have 23 points, because that means you already expect that you lose a game. I never expect that we lose a game."
He said that it "makes no sense" to think too far ahead because Liverpool would "have 30 points" when he thinks "about 10 games", though he declared that he is "not surprised" and he "never thought about it."
The Reds boss said that his team "took the games like they were" and "did the job" needed of them, acknowledging that "sometimes" they played "a little bit better" and "sometimes a little bit worse."
But he refused to say anything more, despite continuing: "It's better to be in this position than another position, but even if we had six points less, you can't just stop playing football. Watford is everything I think about now, not the 10 games we've played until now."