Heat olive oil in a large saucepan over medium-high heat. Add onion and garlic, and sauté 4 minutes or until onion is tender. Stir in potatoes, broth, water, salt, and pepper, and bring to a boil. Cover, reduce heat, and simmer 30 minutes or until potatoes are tender.
Place potato mixture in a blender, and process until smooth. Add yogurt, and process just until blended. Stir in watercress and cheese; stir until cheese melts.