The only goal of a tight game with few chances came with eight minutes remaining when Cristian Battocchio fired home from the edge of the area after a Davide Faraoni shot had been blocked.
Hornets boss Gianfranco Zola admitted "it wasn't offside" and Coyle was also aggrieved because he felt should have had a penalty in the second half when Powell was challenged by Lloyd Doyley in the 18-yard box.
"There's no debate," Coyle said. "James McClean's a yard-and-a-half onside. We knew at the time. Bizarre doesn't cover it.
"We were terrific. Watford are a very good side and will challenge as we will to get back to the Premier League but to come here and give the level of performance we did with our fourth game in nine days, the players were an absolute credit.
"We lost (Marc-Antoine) Fortune [to injury in the first half] and had to change things again but it didn't affect the team because they were outstanding.
"We scored a perfectly good goal - I don't envy the referee, or the officials, their job - but at this level, we understand little fouls sometimes you'll get, sometimes you won't - but you've got to get the major decisions right."
The Wigan boss continued: "We had a stonewall penalty in the second half at 0-0 when Powell's robbed Doyley, Doyley's kicked him and you know Doyley's kicked him straight away because he's put his hands up in the air. The whole stadium knew it was a penalty and it's not given.
"We should still be leaving at 0-0 and obviously the lad's finished a great goal, all credit to him, but the deflection obviously went their way so probably every bit of luck that was going went Watford's way in this game.
"I can't fault the players and how they went about it. We know we've come off the wrong side of two huge decisions and both 0-0 at the time.
"There's no doubt that certainly would have put us in front and then enough to win us the game."