Fighting observed in the capital (6)
I believe the answer is:
warsaw
'capital' is the definition.
(Warsaw is an example)
'fighting observed' is the wordplay.
'fighting' becomes 'war'.
'observed' becomes 'saw' (I've seen this before).
'war'+'saw'='WARSAW'
'in the' is the link.
(Other definitions for warsaw that I've seen before include "Poland's largest city" , "Capital city on the Vistula" , "Polands capital" , "Capital of a European Union state" , "Polish capital" .)