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The phrase "are closely watching" is correct and usable in written English.
It can be used when describing a situation where someone is observing or monitoring something attentively.
Example: "The researchers are closely watching the behavior of the subjects in the study to gather accurate data."
Alternatives: "are monitoring closely" or "are observing attentively."
Exact(60)
Trump's allies are closely watching Bloomberg's moves.
Financiers are closely watching Uruguayan banking.
Other big insurers are closely watching the consortium plans.
School systems around the country are closely watching the case.
Economists are closely watching such signs of slower consumer spending.
As the negotiations in Washington continue, many strategists are closely watching the bond market.
Investors are closely watching a trickle of statistics for guidance about the state of the economy.
Still, the Saudis are closely watching American diplomatic gestures toward Bahrain.
Officials and investors are closely watching the fate of the seven-year bond Greece issued Monday.
And today Turks are closely watching what is happening in Cairo.
Other Republican candidates, particularly Mitt Romney, are closely watching Mr. Huntsman.
More suggestions(3)
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Since I tried Ludwig back in 2017, I have been constantly using it in both editing and translation. Ever since, I suggest it to my translators at ProSciEditing.

Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com