Dnsmasq forwarding not working on AWS

[epomatti]

I'm using dnsmasq as my primary DNS server so I can use wildcard "*." firewall rules, while running on AWS. Unbound is disabled. I'm using a fresh 25.7.5 installation from the marketplace.

Now I would like dnsmasq to forward to 169.254.169.253 (AWS DNS Resolver), so that private VPC addresses get resolved as well, such as an RDS instance.

Trying these didn't work, forwarding events is not showing in the logs.
- Setting it in the General DNS servers populates "/etc/resolv.conf" but forward is not happening.
- Adding a "/usr/local/etc/dnsmasq.conf.d/forward.conf" with "server=169.254.169.253" didn't work.
- I don't think it's a network problem as no errors are showing in the logs.