The Frenchman is nursing a calf injury and will not be risked when Toulouse Olympique visit the John Smith's Stadium tomorrow night.
Watson is prepared to make a late call on Fages, who defied a broken shoulder in last year's final to help St Helens beat Castleford Tigers.
"He's just got a little niggle and cautious is probably an understatement on it," said Watson, who expects Chris McQueen to recover from his injury in time for the Tottenham Hotspur Stadium showpiece.
"It'll probably be one we get asked about every day next week. We'll only know when we get there.
"It's not good that it's flared up at this time. He took a knock in the semi-final and another knock in the Wigan game so he's not right to play this week."
After ringing the changes against the Warriors last week, Watson is set to welcome back several key men including Jermaine McGillvary, Chris Hill and Luke Yates.
He insisted his players are fully focused on the task at hand, knowing a below-par performance could see them lose their place.
"The biggest one is making sure you keep your shirt for the Challenge Cup final," said Watson.
"Because if you turn up this week and don't perform, coaches have decisions to make.
"The players who are not playing become really important and the main ones because they get the opportunity to come in.
"The big one for us is we've done really well so far this season and don't want to be handing our shirts over the week before a Challenge Cup final because that's one game you don't want to be missing out on.
"From looking at how we went about our training session this morning, I think we're really focused and looking forward to the Toulouse challenge."
While ending the club's 69-year wait to bring the trophy back to Huddersfield is a tantalising prospect, Watson has stressed the importance of protecting their league form either side of the final.
"We don't want to just be a team that has got to a Challenge Cup final," he added.
"We want to be in a good position when we come out of it ready to attack the play-offs.
"It was huge to get the two points last week against Wigan. It was a big, big two points for us because it keeps us in touch with the top four.
"This game is exactly the same for us. Toulouse are desperate because it puts them in a different bracket if they can get a win.
"They're going to come fired up but we need to keep in touch with that top four.
"I know teams are going to get a week off while we're playing in the cup final so we need to make sure we're sat in a really good position for when we come out of it."