Davies knows his side can expect a red-hot reception and hostile atmosphere as Dragons also look to regroup after a loss in Connacht.
But he believes the challenge is the perfect chance for his Blues to respond and gain some value league points.
He said: "It's going to be absolutely fantastic. It's a great place to go and the atmosphere will be electric, the fans will be bouncing off the ceiling there.
"Lyn (Jones) is doing a great job and they are in good form. We are playing well too and have had some results, we want to go there and continue that.
"It's going to be a great derby, I'm sure it will be a fantastic occasion, and we are all looking forward to it as we look to get back on the horse," he added.
"There was a lot of frustration in the dressing room after the Ospreys game. We played well but didn't quite put the nails in the box when we needed to.
"Dragons are highly organised and highly committed. With the crowd there too, we can expect massive intensity in the game.
"There have been a few really intense games of late and that maybe the most intense we have had for a while."
Davies also hopes for some positive news on the injury front ahead of the derby clash adding: "We will see how we are after this game, but hopefully we can put a few back out there.
"Rhys Patchell (leg) and Chris Dicomidis (shoulder) are not too bad so hopefully those two, in particular, will be okay."
Watch Blues face Dragons in the New Year's Day game at the Arms Park. Call the Ticket Office on 02920 302030 or click HERE