Horses also use energy, called chi, to communicate within the herd. In this way they express dominance, and sense predators. Combined with sensing that energy, horses also smell us. According to recent research, when it comes to horses, their sense of smell is really significant.
Since angry, frustrated, and emotionally upset humans release products in their sweat, it may be possible that unintentional olfactory messages can upset or anger the animal as well. (Source: C. A. Sarlow, 2002)
If you are angry or frustrated with your horse, or if you are afraid of him, he will know it, as horses can feel and sense it. You can of course lie to yourself, but you are unable to lie to your horse. They can smell us.
Humans are very visual and progress has been largely developed based on our excellent vision. Horses instead, use their much greater olfactory capabilities. They have a large and prominent nose. The horses nose is an accessory olfactory structure that is largely overlooked by humans until for example, the scent of apple pie links to our limbic system and we recall childhood memories.
Humans sweat and this is how horses know so much about us. Their long nose moves large volumes of air with each breath and consequently, traps a large number of small volatile molecules, the epithelium, of their olfactory bulbs identifies. The horses nose is more sensitive to large specific-species molecules such as the ones found in body secretion. They can pick up pheromones, which are chemicals released by one member of a species and produce hormone-like reaction in another.
Humans release pheromones when they sweat, and we sweat even when we think we don’t. And, so it is perfectly reasonable to assume that horses can smell anger, frustration, fear, etc. It seems that we cannot lie to a horse. They can read us like a book.