United's 3-2 derby victory at Manchester City on Sunday put them six points clear of the second-placed Blues in the Barclays Premier League table.
Giggs rates the performance among the team's top three of the season and sees it as one of several encouraging signs - including the imminent return to the defence of skipper Nemanja Vidic, who is expected to make his playing comeback against Sunderland on Saturday - for their overall prospects as they prepare for a hectic Christmas schedule.
Asked if squad morale had been boosted by victory over City, Giggs told manutd.com's podcast Red Voices: "It should do, purely because of the way we performed.
"The bench is very strong and some players aren't even getting on it.
"The squad is looking good at the moment and we've got our captain, Nemanja Vidic, coming back soon.
"We have got everything in place for the busy Christmas period and the confidence of such a great result.
"We accept that we are letting too many goals in and we've had to come from behind too often, but the signs are there that this could be a very good season for us.
"Chelsea (another 3-2 win), Newcastle (a 3-0 victory) and City away have been our three best performances and you probably can't get three bigger challenges.
"The quality and the form is there, we just need the consistency - which we will hopefully get now the Champions League is over (until February) and internationals are gone, and we can purely concentrate on the Premier League and later the FA Cup."
United boss Sir Alex Ferguson spoke before the derby of his optimism that Vidic, absent from the squad since September due to a knee injury, would feature in Saturday's home league encounter with Sunderland.
Asked about if the Serbian might play against City, Ferguson said: "No. definitely not.
"To put him in at City for his first game back would be crazy but I think the Sunderland game definitely."
Vidic could replace Jonny Evans, who picked up a hamstring problem in the City match.