The Argentina international signed for the Club in January but remained at River Plate until this summer.
Since then he has made four appearances for Guardiola’s side, all from the bench, and scored in the Community Shield defeat to Liverpool.
He also made an impact as a second half substitute in Saturday’s comeback victory over Crystal Palace, playing a crucial role in two of City’s four goals.
While Guardiola knew that the Club had signed a talent, the manager confessed in his press conference before the visit of Nottingham Forest that Alvarez’s ability has surpassed his expectations.
He said: “I knew him a little bit, off TV, clips, games in River Plate. I was surprised at how good he is.
“He is so humble, always positive. Every training session he gives everything. I like this type of player.
“He was involved in two goals last game. Always close to the ball, has the sense to be in the position in the right moment. When he drops he has the quality to play. I know people are talking a lot about Erling but Julian is exceptional player.”
Guardiola also asserted that Alvarez will start more matches for City as the season progresses.
Wednesday’s meeting with Forest marks the first competitive midweek fixture of the season, with a further 18 fixtures expected in total before the break for the World Cup in mid-November.
With so many matches to play in a short space of time, the manager expects to rotate the bulk of the side that has started the Premier League season with 10 points from a possible 12.
“Definitely, when Erling doesn’t play we are going to play Julian, I’m almost sure,” said Guardiola.
“All of us are impressed with the guy, for his pace, for his sense of goal, for his work ethic. For many things.”