your watch and your iPhone have to both be connected to the same wifi. otherwise Xcode can't connect to the watch and so it can't find what watchOS version it has and gives this error. also note. watchOS can only connect to 2.4Ghz wifi. (your phone can be on the 5Ghz). But for me, I had 2.4 disabled on my router, so it wasn't even being listed for watch to connect to.

thanks to JD for his great explanation and non-patronising answer.

I had this happen ... for me it turned out that I was signed into the MAC using a different Apple ID. In Xcode I was unable to sign in using either ID, and when I tried I got the "session expired" message. I signed OUT of the MAC ... so no Apple ID signed into the Mac. I was able to delete the Apple ID and sign in to XCODE then I was able to sign in to the Mac again (using the different Apple ID)