"We are watching a movie" is also a good translation. This course is known to have many mistakes, unfortunately, and it doesn't look like they will get fixed soon.
Unfortunately, Duolingo is very opaque about how the teams work, how bugs are fixed and so on, so we don't know much about how the work is done... :(
This would mean something like «We watch/look in the film». This doesn't really work for films.