Xhaka said criticism about the Gunners not being mentally strong enough in the 1-0 loss was 'bulls**t'.
But Holding says his teammates were fully prepared for a battle at Bramall Lane.
"I'm not sure what the result can go down to in the end, but people will say 'oh, Arsenal weren't up for the fight, they're never up for the fight'," he said.
"But we knew exactly what it would be. I know, personally, from being in the Championship with Bolton, what teams like Sheffield United are like - no disrespect to them.
"I knew it would be a physical battle and one that we'd have to stand up to. It's just a set-piece goal that got us out in the end. They didn't really bully us, I wouldn't say and we just hadn't switched on at a set-piece where they managed to get their goal.
"I thought we were just in the ascendancy and trying to attack and attack and they had the deep block of five at the back and just trying to really squish the space and make it difficult for us."