What is the right course of action here?

You answered correctly. In this situation, you are on the priority road, as indicated by the traffic sign visible in the image. The red car wants to turn left and must yield to you since you are going straight. The cyclist is coming from a side street and also must yield to vehicles on the priority road. Therefore, you may proceed first. This follows the German traffic rules: vehicles on the priority road have the right of way over traffic coming from side roads, and oncoming traffic turning left must yield to straight-ahead traffic. Remember to always check for the priority road sign and the intentions of other road users at intersections.