It's located in the head, in the back of boss where the thermostat sits.
In this picture you can see it in the upper right, above the 90 degree rubber coolant hose to the bypass pipe.
Just a side note:
Everyone should check and/or change that tiny little elbow. A small split in that caused massive cooling failure and done broke my head gasket as the cyls had no pressure even after stopping within a minute of seeing steam pour out of the engine bay. (due to massive rust and other issues, this car is now my parts car...)
Although that part isn't found off the shelf, i was able to take it in to the auto store and match it up with prebent cooling pipes for the right angle/size. then just cut the bend out of the 'replacement' pipe and installed. worked like a charm.
On my 'new' 91 xr2, I really need to think about swapping out all my cooling hoses... few of them are the original ford stamped parts...