The sensor is behind the front bumper and attached to a clip near the left side of the power steering cooler. You can see it just by looking thriough the opening near the splitter vane. If the sensor were to fall out the reading would be -144 F, if shorted you would have a reading higher than the 127 you are getting. The sensor is cheap and they do fail fairly regularly just take a look at the wires near the sensor as they are exposed in that area.

 

good info, i think i need to replace mine... im having a similar problem, but mine just reads off quite a bit. like when its 60F out it will say like 80-90F.. any clue on what the sensors cost?

 

If I remember correctly the sensor is less than $20.