You can support watchOS 1 apps in Xcode 7.
You can also support watchOS 2 apps in Xcode 7.
If you want to support both watchOS 1 and watchOS 2 then you will need to have separate targets for each OS (due to the differences in architecture)
For a watchOS 1 app, add a new target and select the Apple Watch section from the left and then click on the WatchKit App for watchOS 1 from the list.
For a watchOS 2 app, add a new target and select the watchOS > Application section and then click on the WatchKit App option in the list.
Couple of things to note about making a watchOS 1 app in Xcode 7 (beta 1)…
Because I did my testing on an iPhone 6 running iOS 8.3 and my watch running watchOS 1.0.1, I needed to change my deployment target to iOS 8.3 but note that you want to do this at a project level rather than just target level (so that the extension also gets set to 8.3 and not just the main app) otherwise it won’t let you deploy onto a real device.
Due to a known issue in Xcode 7 beta 1, a watchOS 1 app will fail to install on a real watch with the following error if your paired phone is 64 bit:
Jun 20 17:25:08 Liams-iPhone companionappd[271] <Notice>: (Error) WatchKit: validateWatchKitApplicationInfoDictionary, invalid Info.plist key 'UIRequiredDeviceCapabilities'
This is because Xcode 7 is adding arm64 to the UIRequiredDeviceCapabilities
info.plist key at build time even to your watchOS 1 extension when it shouldn’t be.
You can temporarily get around this by setting Build Active Architecture Only to NO
for DEBUG mode.
Hope that helps