What is the right course of action?

Your answer is correct. According to German traffic rules, when you see the yellow diamond sign, it indicates that you have the right of way at this intersection. The small sign below it shows a priority road with a side road joining from the right, meaning vehicles coming from the right (like the blue car) do not have priority.

Therefore, you may drive through as you have the right of way. You do not need to yield to the blue car. Always observe the priority signs to understand who must yield, and this helps to avoid confusion at intersections without traffic lights.