When we made an assumption that the USD (or any currency) would be 10% overvalued compared to another currency, would we assume the USD is the price or base currency?
What difference does it make?
because the USD being in the numerator or denominator of the exchange would affect if the USD is 10% overvalued or not. If that is correct.
If not, would you be able to show me an example of how this is not correct?
You said that we’re assuming that USD is overvalued by 10%.
Suppose that the correct valuation is USD1 = SOC2 (SOC = Some Other Currency), so the correct quotes are SOC/USD 2.0000 and USD/SOC 0.5000. If USD is overvalued by 10%, the observed quote would be SOC/USD 2.2000 or USD/SOC 0.4545.
It makes no difference whether USD is the base currency or the price currency.