“When Erling doesn't play, we're going to play Julian,” he told reporters.
“I'm almost sure. We are all impressed for his pace, for his sense of goal, for his work ethic.”
Alvarez, 22, signed for City in January but remained on loan at River Plate before making the move to the Premier League.
Since scoring off the bench on his debut in the Community Shield, he has featured as a substitute in three league games with Guardiola tipping him for big things.
“I knew him a little bit on TV and clips but I am surprised how good he is,” added the manager. “He's so humble, always positive and every training session he gives everything. I like these type of players.
“The impact in the minutes he has played, he could have had a hat-trick at the Camp Nou. And he was involved in two goals in the last game - he has the sense for goals - we are delighted.
“I know people are talking about Erling and we are pleased but Julian is an exceptional player.”