When misting the cage, just spray one small section of the glass, not the entire cage. The ideal is to have water droplets rolling down the glass giving movement to encourage your dragon to run over and investigate. One or two 'squirts' from a misting bottle to a small section of the cage once or twice a day, won't raise the humidity sufficiently to cause problems. It is heavy regular misting all over the cage or over a good portion, that can really raise humidity and thus, increase risk of respiratory infections and other problems.
The cough your dragon is doing when he puffs up, is it more a forced exhale of air, to sound like a short hissy breath? Or is it a definitely cough? ALso, do you notice any mucus or bubbly liquid around his mouth or nostrals? (it is normal for clear bubbles to form in the saliva in the mouth but it should be very clear, if any color, it isn't good). If the cough is just a breathy hiss that is infrequent or only when he puffs out defensively when you are around without any of the other symtoms I mentioned, then it most likely is just him hissing at you and trying to scare you off. Dragons do this defensively, when large potentially dangerous creatures are around (ie you). He will grow out of it once he realizes you are not a predator out to get him. Slow steady movements work best when moving around the dragon.
If his cough is accompanied by any of the other symptoms mentioned above, your dragon may have an upper respiratory infection and will need to see a vet. If in doubt, see a vet. The $45-$100 vet fee for a checkup and some testing, is well worth it to ensure the health of your pet.
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PHLdyPayne