This should not be a problem. The recommender will already need to answer the context in which they know you and your role in their organization. That is where the details can be explained and that typically comes at the beginning of the letter so there is no confusion. Good luck!

should she explain that she is senior to me in the reco? that she is one level above?

To add to what Bhavik pointed out, mentioning her seniority to you is considered a plus (and pretty essential to writing a good recommendation). The recommender needs a stake in the quality of your work.

Does your recommender have a higher grade, but the same designation, such as Analyst III versus Analyst I? If so, the combination of designation and grade would itself denote the higher position.

Good luck,