Pietersen was dropped - for the first time in his career - from the squads announced for the two Twenty20 [ Images ] matches and the five-match ODI series against Pakistan that gets underway at Cardiff on Sunday.
The selectors have said that the 30-year-old, who was named man of the series when England won the Twenty20 World Cup in May, was dropped following a loss of form.
However, Watson said: "I'm absolutely blown away that they dropped him. It's a bit outrageous really, for someone of his quality and the things he's done, to win them the Twenty20 World Cup and then they go, 'You're out.' There has to be underlying issues that might come to the surface on his Twitter page."
"There has to be other reasons, it can't just be for them saying it's performance. It can't just be that," The Sydney [ Images ] Morning Herald quoted Watson, as saying.
"You don't perform the way he did, and what everyone knows he can do I think there must be other issues behind this, not just for not performing that well," he added.
Pietersen broke the story on Twitter with the message: "Done for rest of summer!! Man of the World Cup T20 and dropped from the T20 side too... Its [sic] a f**k up!!"
He posted it on his account kevinpp24, before deleting it minutes later, but not before it had been picked up by several users and circulated around the internet.
The outburst had angered top England and Wales Cricket Board (ECB) bosses.
England Twenty20 squad:
Paul Collingwood [ Images ] (capt), James Anderson [ Images ], Ravi Bopara [ Images ], Tim Bresnan [ Images ], Stuart Broad [ Images ], Steven Davies, Craig Kieswetter, Eoin Morgan [ Images ], Ryan Sidebottom [ Images ], Graeme Swann [ Images ], Luke Wright [ Images ] and Michael Yardy.
ODI squad: Andrew Strauss [ Images ] (capt), James Anderson, Ravi Bopara, Tim Bresnan, Stuart Broad, Paul Collingwood, Steven Davies, Eoin Morgan, Ajmal Shahzad, Ryan Sidebottom, Graeme Swann, Jonathan Trott, Luke Wright and Michael Yardy.