Atmel ATmega32HVB features on-chip debugging via debugWIRE interface, with either AVR JTAGICE mkII or AVR Dragon.
Notice that debugWIRE must be enabled via the ISP interface if not enabled, and disabled after debugging to enable ISP again. This is described in Atmel Studio help. Leaving the ATmega32HVB with DWEN-fuse on will increase current consumption.