Thomson, who had started the day tied for top spot with fellow Scot Gemma Dryburgh after an opening 67, sits joint-fifth at the halfway stage on six-under following a second-round 71 at Dubbo Golf Club.
The Aberdonian is just three shots off the lead, held by Belgium's Manon De Roey, with Dryburgh two further back in the second LET event of the season after she carded a 73.
“My putting was great again today," said Thomson, whose best finish on the LET was second in the 2017 Hero Women’s Indian Open.
"I probably didn’t hit my irons as well as yesterday but when the putter is working it helps you to get up and down when you need to and the driving was good as well today.
"I probably missed a few fairways that I didn’t yesterday, but not by much. Overall, I’m playing solid.”
Dryburgh had a double-bogey 7 on her card, but the Beaconsfield-based player is also still in the mix with two rounds to go as she bids to back up a fourth-place finish in last week's Australian Ladies Classic.
It was a good couple of days for the Scots in the field as Kelsey MacDonald, Kylie Henry, Alison Muirhead and Laura Murray also made the cut.
MacDonald carded a second-round 69 to sit alongside Henry (72) in joint-22nd on level-par, with rookie Muirhead (72) and Murray (76) progressing on two-over and four-over respectively.
Helped by two eagles, De Roey carded an eight-under 64 to move into a two-shot lead over India's Diksha Dagar, Swede Camilla Lennarth and France's Agathe Sauzon.
The R&A and the Staysure Tour has announced that the prize fund for this year's Senior Open Presented by Rolex has been increased to $2.5 million.
It represents an increase of $50,000 for an event taking place at Sunningdale from July 23-26.
Johnnie Cole-Hamilton, the R&A's Executive Director – Championship, said of the 25 per cent rise: "It reflects our ambitions to elevate the championship for the world’s best senior professional golfers.”
European Disabled Golfers Association golfers George Groves and Brendan Lawlor will join forces in a European Tour first when they tee it up at the innovative GolfSixes Cascais in The pair will form the 'EDGA Team' as one of four wildcard sides when the event returns to Oitavos Dunes Golf Club in Portugal in May.
The step, which is part of tour's continuing commitment to "inclusivity and innovation", will mark the first time golfers from the World Rankings for Golfers with Disability will compete alongside European Tour professionals in a regular season event.