According to the 1996 Mercury Grand Marquis Owner Guide : ( DOT 3 brake fluid , meeting Ford specification ESA-M6C25-A )
Could be the caliper or the metal line. You will have to have it checked.
At the front of the engine , towards the drivers side of the engine ( power steering fluid reservoir on a 1998 Mercury Grand Marquis )
The red " BRAKE " light in your dash means that either your parking brake is on or the BRAKE FLUID LEVEL in your brake master cylinder in the engine compartment is LOW
Your 1996 Mercury Grand Marquis may need a new transmission or something as simple as transmission fluid.
Into the power steering reservoir.
According to the 2004 Mercury Grand Marquis Owner Guide : ( DOT 3 brake fluid , meeting Ford specification ESA-M6C25-A is recommended ) * if DOT 3 is not available , DOT 4 can be used ( I'm not a mechanic / technician but I don't believe that both types should be in the system at the same time )
It is part of the power steering pump assembly.
Recommended at every 25,000 miles
I was looking at a picture in the 2003 Mercury Grand Marquis Owner Guide and it shows the power steering fluid reservoir at the front of the engine compartment between the engine coolant reservoir and the engine air filter box
On a 1999 Mercury Grand Marquis : The automatic transmission fluid level dipstick is in the engine compartment , near the firewall , towards the passenger side of the engine