Captain Deeney smashed a shot into the roof of the net - his first goal from open play all season - to help the Hornets crawl six points above the bottom three.
It was the only moment of quality in an otherwise dreadful match as Everton offered next to nothing.
They have won once away from home in the Premier League under Sam Allardyce and are a point above the Hornets.
In fact, Everton have now won just one of their last 22 Premier League away games and have not kept a clean sheet since Boxing Day.
Their best chance came in stoppage time when goalkeeper Jordan Pickford went up for a corner and caused some chaos.
Former Watford manager Marco Silva was in the frame for the Everton job when these two sides last met back in November, but much has changed in a short space of time.
After picking up 10 points in his first four Premier League games as Everton boss, Allardyce has seen his side accrue just nine in the last 10.
The former England manager spoke of the positives of a warm-weather training camp in Dubai this week, but there was no sign of improvement as Everton mustered one tame Gylfi Sigurdsson shot on goal before Pickford's late intervention.
The Toffees are ninth in the table but just seven points above the bottom three.
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