Davies matched her opening 68 on Friday for an 8-under par total of 132.
The former World No. 1 leads Sophie Sandolo, a former fashion model from Italy, who had a 3-under par 69 to add to her opening 71 to sit on 4-under as she strives for her maiden victory on the Ladies European Tour.
And Nadina Taylor finds herself in the position of leading Australian professional after rounds of 72 and 70. Taylor, from Mona Vale on Sydneys Northern shores, lies a further two shots behind the Italian.
Five players are tied in fourth place including Englands Trish Johnson, who had another level par 72, Rachel Teske from Australia who had a 71, Stefania Croce from Italy who had 71, South African Laurette Maritz who struggled to a 75 and overnight leader Christina Kuld, who had a 76.
But it is all eyes on Davies over the weekend and after her first two days play, it is difficult to see anyone overtake her as she is in vintage form.
The 40-year-old from Ottershaw in Surrey has won the British, U.S., Thailand, Danish, Italian, Belgian, Swiss, Scottish, Welsh, Spanish and Irish National Opens among her 65 worldwide titles spanning a 19-year-career, and admitted she wants to add the Australian Womens Open to her impressive rsum for win number 66.
However, she is taking nothing for granted as last year, Davies squandered the opportunity when she led after three rounds and was overtaken by Scotlands Mhairi McKay, who won her first title after a dramatic Sunday afternoon at nearby Terrey Hills GC.
Despite an ignominious start to her round, dropping shots at the opening two holes, Davies recovered with birdies at the third, sixth and eighth to turn in one under 34.
Davies began her back nine with a powerful display of driving around this tight and tree lined 105-year-old course and notched up successive birdies at the 10th and 11th to stretch her lead to three shots over the Italian, who posted her score at lunchtime before Davies had teed off.
Even with a dropped shot at the long par-3 13th, Davies rallied and birdied the 14th and 17th to extend her lead. But even she knows that leads, no matter how big, are fickle.
I wont be changing the game plan over the weekend, said Davies, who led a huge gallery around the course.
Im going to try and make as many birdies as I can. No lead is safe enough and I know that leads can disintegrate quickly. Ernie Els proved that at the Heineken and hes the second best player in the world.
Four shots with 36 holes to play is nothing. You can lose that in a hole around here.
Sandolo, who best career finish is second in last year's Spanish Open, began her day at the tenth and made a good chip and putt for her first birdie, another followed at the 14th where she played a masterstroke to a couple of inches, despite being under a bush with a restricted swing.
Turning in 2-under 35, the 27-year-old from Monte Carlo pushed her drive at the second to give a shot back, but closing birdies at the fifth from 15 feet and the ninth from six feet saw her snatch the lunchtime lead.
Ive been playing well and hitting it straight for two days, said Sandolo, known for her stylish dress on the course and who looked resplendent in her blue and white floral ensemble in the 30 degree heat.
Ive got a good pace on the greens and thats important as they are very fast and Im limiting my three putts. Most of the time, Im just trying to two-putt the greens.