After the release of iOS 14.7 and watchOS 7.6, Apple confirmed the presence of a bug that could prevent users from unlocking their Apple Watch by simply unlocking the paired iPhone via Touch ID.
After updating to iOS 14.7 e watchOS 7.6, some users they are no longer able to unlock the Apple Watch using the special function that allows unlocking using the iPhone’s Touch ID directly, without having to interact with the smartwatch. The problem it only concerns unlocking via iPhones equipped with Touch ID and not for models that integrate Face ID.
Apple’s recommended temporary solution is to type the passcode on the Apple Watch, without relying on unlocking via iPhone. The company assures that the problem will be resolved in a future software update.
In addition, users who have forgot your Apple Watch password they will have to reset their devices. Business users whose iPhones are loaded with MDM profiles that require alphanumeric passcodes will need to contact their MDM administrators to remove the passcode requirement and then unpair, reset, and set up their Apple Watches again.