My current workaround is to use XCode Cloud and use Testflight (internal Testing).
This way I can build my app, install via testflight, and test it on the apple watch.
It is not perfect, but it will work well with the watch and you can test on device.
Hope Apple is addressing this soon!
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I am also unable to see the apple watch in xcode's devices. I have tried everything to resolve this but so far no luck.