Can't pair new apple watch with iphone.

I have an iPhone 8 plus and just upgraded my apple watch to the new version 7. My phone recognizes that I have a new watch to pair, the apple watch brings up its pairing screen. I hold the phone over the watch to scan the grainy screen once prompted to. The phone asks if I want to set up a new phone or use backup. I select backup. My phone gives displays a message that a newer version of the apple watch software is available. I try to update the watch. After a few moments, the phone displays the message that the watch is being unpaired. I'm then looped back to the beginning and have to start all over again. Very frustrated right now. I've tried turning my phone off and back on, the watch off and back on, and the same situation occurs. Even if I try to skip the watch software upgrade I have the same problem. Anyone else having this issue?