If I’m at a calorie deficit but also losing water weight does that mean that I am still losing fat and there’s just some water weight loss along with it?

I’ve been losing a good amount of weight and I’ve definitely been at a calorie deficit of 500 - 1000 depending on wether I worked out that day, however sometimes I lose extra weight and I assume it’s water weight but I don’t know how much of it is water weight. And sometimes I’ll lose a good 3 pounds, then the next day or two gain back one, however it’s still progress because I lost 2 pounds. For example I was 208 last week then I was 205, then 2 days later I’m 206. But I’ve definitely been at a calorie deficit for all of this so no matter what am I still losing fat? Even if there’s some water weight along with it?

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