watch vs observe

watch is a noun but observe is not a noun.

Word	Noun	Adjective	Verb	Adverb
watch	Yes	No	Yes	No
observe	No	No	Yes	No

As verbs, observe is a hyponym of watch; that is, observe is a word with a more specific, narrower meaning than watch:

Other hyponyms of watch include witness, rubberneck, catch, see, take in, view, watch.

As verbs, watch and observe are synonyms defined as:

Other synonyms of watch include follow, keep an eye on, watch over.

watch (noun)	observe (noun)
a purposeful surveillance to guard or observe
the rite of staying awake for devotional purposes (especially on the eve of a religious festival)
a small portable timepiece
a person employed to keep watch for some anticipated event
a period of time (4 or 2 hours) during which some of a ship's crew are on duty
the period during which someone (especially a guard) is on duty

watch (verb)	observe (verb)
find out, learn, or determine with certainty, usually by making an inquiry or other effort	stick to correctly or closely
look attentively	make mention of
be vigilant, be on the lookout or be careful	watch attentively
observe without intervening	observe with care or pay close attention to
observe or determine by looking	discover or determine the existence, presence, or fact of by perception with the eyes
see or watch	follow with the eyes or the mind
follow with the eyes or the mind	show respect towards
	behave as expected during of holidays or rites
	conform one's action or practice to