They either watch you to know when to signal, in the cases where it actually "works" (which, as fucked up as it is, reading your body language is "working" for some definition of working), or they're just using it as an excuse to search/harass you, in which case they just signal when they want to.

https://www.bjjohnsonlaw.com/probable-cause-or-probable-fiction-the-legal-myth-of-the-drug-sniffing-dog

A 2011 analysis by the Chicago Tribune examined three years of data on police dog alerts during traffic stops in suburban Chicago. The study found that drugs or paraphernalia were discovered in only 44% of cases where dogs alerted. Notably, the accuracy dropped to 27% when the driver was Latino, suggesting potential bias in the deployment or interpretation of canine alerts.